SAA Drops EZE, Looks To Trim Other Longhaul

LAXintl · Thu Nov 07, 2013 3:56 pm

As part of its restructuring plan, South African Airways management has identified loss making long haul routes for cuts.

Both Beijing and Buenos Aires were at the top of the carriers list for discontinuation, however due to "shareholder views" (read SA government), carrier has opted to keep Beijing and only drop Buenos Aires for now. According to South African Department of Public Enterprises, China had "strategic and development reasons” for being retained.

According to SAA the Buenos Aires route was losing approx USD $5mil annually, while Beijing was generating a $30mil loss.

Additionally Sao Paulo and Mumbai were identified as loss making markets to be cut also, however they are also being retained for now.

Story:
Argentina complains South African Airways decision to cut the Buenos Aires route
http://en.mercopress.com/2013/11/07/...sion-to-cut-the-buenos-aires-route
and
Study finds Johannesburg-Mumbai route unprofitable
http://www.thehindubusinessline.com/...-for-sa-airways/article5314298.ece

=

In my view, its good loss making routes are getting the chop, however yet again here the government is only allowing SA to make half-steps and continue to fly markets which continue to accumulate red ink.
Hardly the proper full recipe for the long time loss making enterprise.

[Edited 2013-11-07 08:15:15]

EddieDude · Thu Nov 07, 2013 4:44 pm

Wow, so with this Argentina has lost its air links with South Africa. First MH quit EZE-CPT and now SA ends EZE-JNB. I wonder if the Argentinian government will push AR to launch service to South Africa. Interesting that GRU is also on the list of destinations to be cut; I would have imagined that JNB-GRU was at least mildly profitable.

yellowtail · Thu Nov 07, 2013 4:49 pm

If all EZE-JNB links have been cut, that traffic will presumably flow over GRU now....might make buoy those routes now.

EddieDude · Thu Nov 07, 2013 4:57 pm

Quoting yellowtail (Reply 2):
If all EZE-JNB links have been cut, that traffic will presumably flow over GRU now....might make buoy those routes now.

Very good point. SA would need however to find a codeshare/mileage partner for GRU-EZE or GRU-AEP flights (and maybe other GRU-Argentina flights) in order to be in a position to continue serving Buenos Aires/Argentina fliers.

AF022 · Thu Nov 07, 2013 5:02 pm

Quoting LAXintl (Thread starter):
Additionally Sao Paulo and Mumbai were identified as loss making markets to be cut also, however they are also being retained for now.

How on earth can GRU not be profitable for SAA? It is one of the few routes with good aircraft utilization.

Had you asked me what are the most profitable routes for SAA I would have thought GRU, PEK, BOM and EZE because utilization to Europe is so bad. But if SAA can't even make money with these routes they are really in bad shape.

IrishAyes · Thu Nov 07, 2013 5:10 pm

Quoting EddieDude (Reply 1):

Wow, so with this Argentina has lost its air links with South Africa. First MH quit EZE-CPT and now SA ends EZE-JNB.

Yup. But it's largely because the yields are not there between the two markets. Argentina is not a high growth market. Moreover, the financial states of both flag carriers cannot support linkages.

Quoting EddieDude (Reply 1):
I wonder if the Argentinian government will push AR to launch service to South Africa

Possibly. But, as we all know, AR is not a picnic themselves

Quoting EddieDude (Reply 1):
Interesting that GRU is also on the list of destinations to be cut; I would have imagined that JNB-GRU was at least mildly profitable.

Virtually all of SAA's long haul routes are unprofitable, according to sources: PEK, HKG, BOM, GRU and EZE included. Of those, EZE is the most politically and economically unstable, so it is the first to go. GRU will be retained just by nature of the fact that it is Brasil. PEK, by similar virtue of being part of a BRIC country, has also received government opposition to being chopped due to its political importance. I cannot imagine how SAA can expect to turn a profit on this route with an A346.

BOM ought to be axed as well. It's simply redundant for SAA to serve this market despite the large volume between South Africa and India - which is frankly far too-yielding and subject to being eaten alive by the GCCs. After forging codeshares with EY and 9W, SA should just abandon serving India on its own metal entirely and route pax via AUH.

Quoting LAXintl (Thread starter):
In my view, its good loss making routes are getting the chop, however yet again here the government is only allowing SA to make half-steps and continue to fly markets which continue to accumulate red ink.
Hardly the proper full recipe for the long time loss making enterprise.

Agreed. Trimming the fat doesn't do much good when the entire structure is completely bloated.

SAA also has NO long-haul fleet replacement for the Airbus A340s which is absolutely going to slaughter them if they don't act fast.

[Edited 2013-11-07 09:11:21]

mercure1 · Thu Nov 07, 2013 5:11 pm

So lets see.
Article says Sao Paulo loses more money then EZE. So lets put that at $10mil. Also for fun lets assume Mumbai lose $10mil.

So airline says it identified 4 markets that lose $55mil USD annually and government only allow then to cut 1 route at $5mil savings.

SA is a cancer patient and needs major restructuring, not a little aspirin.

bsbisland · Thu Nov 07, 2013 5:23 pm

SAA flies JNB-GRU 11 weekly. If it's really unprofitable it would make more sense to cut a few weekly frequencies before dropping it. And for some reason the airline has not announced any reduction in frequencies.

AF022 · Thu Nov 07, 2013 5:55 pm

Quoting bsbisland (Reply 7):
SAA flies JNB-GRU 11 weekly. If it's really unprofitable it would make more sense to cut a few weekly frequencies before dropping it. And for some reason the airline has not announced any reduction in frequencies.

Agree. SA224 that arrives GRU at 0100 could surely be cut. That arrival time in GRU is awful. They should cut that flight and leave SA222/223 which has a great schedule.

If they are losing money to GRU this would be the quickest way to resolve losses.

airbazar · Thu Nov 07, 2013 6:20 pm

Quoting AF022 (Reply 4):
Had you asked me what are the most profitable routes for SAA I would have thought GRU, PEK, BOM and EZE because utilization to Europe is so bad. But if SAA can't even make money with these routes they are really in bad shape.

Quoting AF022 (Reply 8):
If they are losing money to GRU this would be the quickest way to resolve losses.

i don't believe SA's losses have much to do with the markets or routes they fly to. I think awfully poor management and special interests are the cause.

Quoting irishayes (Reply 5):
Virtually all of SAA's long haul routes are unprofitable

This just proves my point. It points to a deeply rooted problem with the company, not the markets or routes that they serve.

behramjee · Thu Nov 07, 2013 6:24 pm

This is all so contradictory. To be very frank, not a single long haul route of SAA makes a NET PROFIT. Some may make an OPERATIONAL PROFIT but definitely not a net profit. The only A340 operated route according to me that makes or comes close to making a net profit for SAA are LAD and LOS !

As far as BOM and PEK are concerned, I would suggest the following to keep both online in a cost saving manner:

a) Operate a daily A346 JNB-BOM-PEK-BOM-JNB and get 5th freedom traffic rights on BOM-PEK-BOM. On this sector, it can code share with both CA and 9W + have a monopoly as no one flies BOM-PEK nonstop for which there is good demand and premium traffic to be exploited. Look at how nicely SAA is performing on IAD-DKR-IAD in terms of S/F.

b) In this way, both key cities are maintained online and get to be operated on a daily basis each respectively.

As far as GRU is concerned, if it is such a big loss maker, first step to reduce it from 11 weekly to daily and help stabilize the yields there. But yes it should definitely not be cut.

What about the daily PER and JFK services which also I would reckon lose far more than JNB-BOM !

For USA, SAA should just focus on IAD and cut off JFK for cost saving purposes as IAD is a major STAR hub and they exploit it better with beyond UA feed. FYI, SAA carried last year over 60,000 pax alone on IAD-DKR-IAD !

HKG too I dont see any point of SAA continuing to operate there as the competition is intense. They would be better off to SE Asia code sharing out of JNB with fellow STAR partners TG and SQ via their respective hubs.

EddieDude · Thu Nov 07, 2013 7:13 pm

Quoting irishayes (Reply 5):
Argentina is not a high growth market. Moreover, the financial states of both flag carriers cannot support linkages.

It is a pity. Argentina is a major commodities producer and it could be a success story if it were in the hands of capable rulers. Buenos Aires could be a major Southern Hemisphere hub of finance and trade.

Quoting irishayes (Reply 5):
as we all know, AR is not a picnic themselves

Absolutely true, but if Mrs. Prez wants AR to launch a flight to some unreasonable destination, she might just get it. She will have a lineup of very nice A332s and A345s ready to be deployed all over.

Quoting irishayes (Reply 5):
similar virtue of being part of a BRIC country

MIST is the new BRIC lol.

Quoting irishayes (Reply 5):
SAA also has NO long-haul fleet replacement for the Airbus A340s which is absolutely going to slaughter them if they don't act fast.

They were planning an order rather soon, no?

Quoting bsbisland (Reply 7):
SAA flies JNB-GRU 11 weekly. If it's really unprofitable it would make more sense to cut a few weekly frequencies before dropping it. And for some reason the airline has not announced any reduction in frequencies.

Yes, maybe yields will adjust upwards if it is scaled down to 7 or 8 weeklies.

123 · Thu Nov 07, 2013 7:54 pm

I´ve never been on an empty SAA flight in/out of GRU or HKG.
PEK yes, last flight JNB/PEK there were 2(two) pax in C class and it seemed Y was also quite empty. Question here is, how much cargo is in the hold, remember airlines earn on the main deck and on the cargo deck. In- and Outbound.
Would surprise me if GRU or HKG are axed.
EZE is different, with the bad economic situation of Argentina, can understand low demand on that route - now. That can change any moment though.

DexSwart · Thu Nov 07, 2013 8:53 pm

JNB - PER is quite successful, I believe.

Along with LHR and I'm assuming the North American routes, what are the most profitable routes for SA?

MesaFlyGuy · Thu Nov 07, 2013 9:18 pm

Quoting behramjee (Reply 10):
For USA, SAA should just focus on IAD and cut off JFK for cost saving purposes as IAD is a major STAR hub and they exploit it better with beyond SA)">UA feed. FYI, SAA carried last year over 60,000 pax alone on IAD-DKR-IAD !

Well SAA has been rightsizing the JFK route lately. It is now, seasonally, an a343 again through DKR (westbound). I think there is a pretty good O&D market from NYC to South Africa so I can't imagine they'll want to dump that anytime soon. Couple that with the codeshare with SA)">B6, I imagine SA is not doing completely dreadfully at JFK, at least not enough to cut the route completely.

AF022 · Thu Nov 07, 2013 9:21 pm

Quoting behramjee (Reply 10):
For USA, SAA should just focus on IAD and cut off JFK for cost saving purposes as IAD is a major STAR hub and they exploit it better with beyond SA)">UA feed. FYI, SAA carried last year over 60,000 pax alone on IAD-DKR-IAD !

I would be surprised if SAA didn't make money on the JFK route. They seem to have very strong loads in the front and fares are really high.

Quoting 123 (Reply 12):
Question here is, how much cargo is in the hold, remember airlines earn on the main deck and on the cargo deck.

Worldwide cargo market has been very rough lately.

Quoting DexSwart (Reply 13):
Along with LHR and I'm assuming the North American routes, what are the most profitable routes for SA?

I doubt LHR is profitable. Too much ground time. Too much competition.

MD11junkie · Thu Nov 07, 2013 9:36 pm

Quoting bsbisland (Reply 7):
SAA flies JNB-GRU 11 weekly. If it's really unprofitable it would make more sense to cut a few weekly frequencies before dropping it. And for some reason the airline has not announced any reduction in frequencies.

lol

Quoting AF022 (Reply 8):

If they are losing money to GRU this would be the quickest way to resolve losses.

They are losing money on both. Even with an A330 on SA222/223.

Quoting behramjee (Reply 10):
For USA, SAA should just focus on IAD and cut off JFK for cost saving purposes as IAD is a major STAR hub and they exploit it better with beyond SA)">UA feed. FYI, SAA carried last year over 60,000 pax alone on IAD-DKR-IAD !

JFK has been rerouted through DKR since 27OCT13. Albeit I don't think it's permanent. JFK non-stop is a big money loser.

Quoting airbazar (Reply 9):

i don't believe SA's losses have much to do with the markets or routes they fly to. I think awfully poor management and special interests are the cause.

Quoting irishayes (Reply 5):
Virtually all of SAA's long haul routes are unprofitable

This just proves my point. It points to a deeply rooted problem with the company, not the markets or routes that they serve.

FINALLY! Thank you, Airbazar - it seems you are the only one that has seen where the actual problem is. Welcome to my RU List.

Saludos,

MD11junkie · Thu Nov 07, 2013 9:42 pm

Quoting 123 (Reply 12):
EZE is different, with the bad economic situation of Argentina, can understand low demand on that route - now. That can change any moment though.

The route has been growing non-stop as well as the yields. It's impressive. GRU, au contraire to logic, has been falling tremendously. What bad economic situation in Argentina?

Quoting AF022 (Reply 15):

I doubt LHR is profitable. Too much ground time. Too much competition.

Exactly.

Quoting AF022 (Reply 15):
I would be surprised if SAA didn't make money on the JFK route. They seem to have very strong loads in the front and fares are really high.

Restricted operations with A340-600. Not making money. You should be surprised.

Quoting DexSwart (Reply 13):
JNB - PER is quite successful, I believe.

PER isn't a bit of successful as HKG or BOM in terms of LF. I seriously doubt it is in a better financial shape. PER is being kept so that SAA can say that flies to all continents.

Quoting irishayes (Reply 5):
Of those, EZE is the most politically and economically unstable

Generalizing much?

[Edited 2013-11-07 13:48:55]

behramjee · Thu Nov 07, 2013 9:58 pm

Quoting MD11junkie (Reply 16):
JFK has been rerouted through DKR since 27OCT13. Albeit I don't think it's permanent. JFK non-stop is a big money loser.

JFK in the past too I recall was re-routed via ACC with 5th freedom traffic rights but that too got shut.

Quoting AF022 (Reply 15):
I would be surprised if SAA didn't make money on the JFK route. They seem to have very strong loads in the front and fares are really high.

You seem to be forgetting that JNB-JFK is an ultra long haul flight operated with a gas guzzling A340. Apart from LH these days (on certain selected routes only), I dont think so any airline makes a net profit flying an A340 on long haul services! Also JFK-JNB one stop via EU is very cheap on AF/KL in particular if you want to save especially if a family of 4 is flying.

Quoting DexSwart (Reply 13):
Along with LHR and I'm assuming the North American routes, what are the most profitable routes for SA?

Those are within Africa only as the yields, premium demand and shorter flying distance involved helps them here as well as excess baggage revenue.

jsnww81 · Thu Nov 07, 2013 10:32 pm

Quoting behramjee (Reply 18):
PER isn't a bit of successful as HKG or BOM in terms of LF. I seriously doubt it is in a better financial shape. PER is being kept so that SAA can say that flies to all continents.

A South African friend of mine refers to the JNB-PER flight as the "Emigration Express." Full of South Africans leaving the country outbound, and returning to visit friends and family on the inbound.

jfk777 · Fri Nov 08, 2013 1:24 am

Quoting 123 (Reply 12):
never been on an empty SAA flight in/out of GRU or HKG.
PEK yes, last flight JNB/PEK there were 2(two) pax in C class and it seemed Y was also quite empty. Question here is, how much cargo is in the hold, remember airlines earn on the main deck and on the cargo deck. In- and Outbound.
Would surprise me if GRU or HKG are axed.

Peking is being operated to please China, SAA needs to stop being the AR of Africa. Buy or lease some 777 and ditch the 4 engine A340 on AR, they would love some -600 to go with their new ex-Singapore A340-500's. Does flying to Zurich and FRA make sense, FRA perhaps but not every secondary star hub in Europe.

RyanairGuru · Fri Nov 08, 2013 1:35 am

Quoting jsnww81 (Reply 19):
A South African friend of mine refers to the JNB-PER flight as the "Emigration Express." Full of South Africans leaving the country outbound, and returning to visit friends and family on the inbound

That's the story of about 90% of the market between South Africa and Australia. QF JNB-SYD is exactly the same.

I would expect that route to be retained just to connect the South African "diaspora" to home. I doubt its profitable, though. SAA have said in the past that they lose money on the QF codeshare JNB-SYD (which amuses me greatly) so I can't see why they would be rolling in it at PER. Again, it comes down to systemic management issues. SYD-JNB is said to be an absolute gold mine for QF (which is why it amuses me that SAA can't make a profit selling codeshares) and when you look at the fairs between AUS and RSA you can see why it would be profitable. Unfortunately, I don't think that SAA is able to properly realise that potential.

qf002 · Fri Nov 08, 2013 1:41 am

Quoting MD11junkie (Reply 17):
PER isn't a bit of successful as HKG or BOM in terms of LF. I seriously doubt it is in a better financial shape. PER is being kept so that SAA can say that flies to all continents.

Given the profit sharing, metal neutral JBA that SA has with QF, and the fact that QF is making money out of JNB, it's fair to assume that SA is as well. Any route that is turning a profit has to be one of their stellar performers if they really are in such bad shape (which I don't doubt they are).

MesaFlyGuy · Fri Nov 08, 2013 1:48 am

So, if the Arentinians are complaining about the flight being axed, they have 5 capable aircraft being delivered. Do something about it and start the route yourself!

AF022 · Fri Nov 08, 2013 4:05 am

Quoting behramjee (Reply 18):
You seem to be forgetting that JNB-JFK is an ultra long haul flight operated with a gas guzzling A340. Apart from LH these days (on certain selected routes only), I dont think so any airline makes a net profit flying an A340 on long haul services! Also JFK-JNB one stop via EU is very cheap on AF/KL in particular if you want to save especially if a family of 4 is flying.

if SA is targeting families then they really are in bad shape. ULH cannot work full of families.

My anecdotal evidence is that the flights are full up front very frequently, and that their fares are very high. Even with payload penalty this flight cannot be a dog.

AR385 · Fri Nov 08, 2013 4:23 am

Quoting EddieDude (Reply 1):
Wow, so with this Argentina has lost its air links with South Africa. First MH quit EZE-CPT and now SA ends EZE-JNB. I wonder if the Argentinian government will push AR to launch service to South Africa. Interesting that GRU is also on the list of destinations to be cut; I would have imagined that JNB-GRU was at least mildly profitable.

Strange indeed because AR flew that route during the 80s. It was first EZE-CPT and then EZE-JNB. IT was a very succesful flight and many Argentines flew the route. Both countries have a lot in common too. The market is there, as you can see how MH and SA kept it. This fact probably speaks more about about SA not being able to manage its markets adequately than the route not working.

Quoting EddieDude (Reply 11):
Absolutely true, but if Mrs. Prez wants AR to launch a flight to some unreasonable destination, she might just get it. She will have a lineup of very nice A332s and A345s ready to be deployed all over.

She was considering a route to Luanda.

Quoting MesaFlyGuy (Reply 23):
So, if the Arentinians are complaining about the flight being axed, they have 5 capable aircraft being delivered. Do something about it and start the route yourself!

They just might. I´m sure it will be a very succesful one.

dcajet · Fri Nov 08, 2013 6:22 am

Quoting AR385 (Reply 25):
Quoting EddieDude (Reply 11):
Absolutely true, but if Mrs. Prez wants AR to launch a flight to some unreasonable destination, she might just get it. She will have a lineup of very nice A332s and A345s ready to be deployed all over.

She was considering a route to Luanda.

That is really funny, but one, albeit small, detail. It is not true.

Mrs Kirchner is not involved in running AR, neither at the strategic/planning level or the day to day. No one from AR has ever said such nonsense. Where that story grew legs was on a commercial/industrial delegation from Argentina to Angola, with the objective of growing the trade between both nations. The delegation was led by Mrs Kirchner's secretary of commerce, the colorful and much disliked Mr Guillermo Moreno. For the actual flight from EZE to LAD, one of the three 744 that AR had retired from its fleet - LV-AXF, if memory serves, was used for the trip across the South Atlantic as she was waiting for her return to its lessor and eventually retirement under the CA sun.

The Buenos Aires press reported a few weeks ago that since Mr Moreno and his posse alighted in Luanda, trade between Argentina and Angola has... gone down!

civetfive · Fri Nov 08, 2013 6:24 am

Quoting jfk777 (Reply 20):

there's likely to be a large amount of second-hand 777s from the likes of SQ and EK soon, which an airline like SA could snap up relatively cheaply.

LipeGIG · Fri Nov 08, 2013 9:23 am

It seems SA pays the price of a limited O&D market and growing competition by Gulf Carriers.

Quoting AF022 (Reply 4):
How on earth can GRU not be profitable for SAA? It is one of the few routes with good aircraft utilization.

Just shows how this forum is biased on saying profitable/non-profitable.
How ? Probably due to the limited size of O&D that makes them rely on too much connections that probably are not on the right fare.
They probably will reduce to a daily flight.

Quoting behramjee (Reply 18):
Those are within Africa only as the yields, premium demand and shorter flying distance involved helps them here as well as excess baggage revenue.

Seems the only markets where they can rely more on O&D.

Tupolev160 · Fri Nov 08, 2013 9:25 am

Sad to see another route from EZE being dropped. Looks more as a result of a lack of cooperation and equipment being used than of a lack of logic supporting it being in place.

PATristar · Fri Nov 08, 2013 11:05 am

Next year we will have the world cup in Brazil and in 2016 the summer olympic games, If SAA drop the GRU flight TAAG will smile alone with the only link between the sub-ecuatorial Africa to Brazil.

Stitch · Fri Nov 08, 2013 11:20 am

Quoting LAXintl (Thread starter):
According to South African Department of Public Enterprises, China had "strategic and development reasons” for being retained.

If South Africa's economic relationship with China generates more than $5 million a year, it could very well be worth having SAA absorb the loss in continuing to operate the route.

Quoting irishayes (Reply 5):
SAA also has NO long-haul fleet replacement for the Airbus A340s which is absolutely going to slaughter them if they don't act fast.

Quoting EddieDude (Reply 11):
They were planning an order rather soon, no?

SAA Operations wants the Airbus A350, but management wants a competition so they're pushing for Boeing to submit an RFP for the 787 (and I would guess 777X).

IrishAyes · Fri Nov 08, 2013 3:42 pm

Quoting MD11junkie (Reply 17):
Generalizing much?

It's not a generalization if its true. Why should SAA fly a high-CASM aircraft to a no-growth country? MH figured this out last year and canned their EZE ops.

LAXintl · Fri Nov 08, 2013 3:53 pm

Its becoming clear in my view, this "restructuring" is hardly going to be the cleansing the airline needs.

Government clearly rather force airline maintain unprofitable links to BRICS nations for political interest rather than letting commercial realities dictate the route map.

Hope SA population is happy with their tax dollars continue to be plowed into the indebted airline.

Quoting Stitch (Reply 31):
If South Africa's economic relationship with China generates more than $5 million a year, it could very well be worth having SAA absorb the loss in continuing to operate the route.

You might want to re-read.

PEK is losing $30mil.

behramjee · Fri Nov 08, 2013 4:41 pm

I'm surprised though none of the Chinese carriers fly to South Africa given that its China's biggest trading partner in Africa. A route like PEK-MRU-JNB (CA) or CAN-MRU-JNB (CZ) operated 3/4 times per week using a B772ER would be quite adequate.

mercure1 · Fri Nov 08, 2013 4:52 pm

From what I can gather from winter timetable SA service following longhaul markets with weekly schedule.

Europe
Frankfurt - 7x - A346
London - 14x - A332/A340/A346
Munich - 7x - A332/A340/A346

Asia
Beijing - 3x - A346
Hong Kong - 7x - A340/A346
Mumbai - 7x - A332

Americas
Buenos Aires - 3x - A340
New York - 7x - A340/A346
Sao Paulo - 11x - A332/A340/A346
Washington - 7x - A340

Australia
Perth - 7x - A340/A346

AR326 · Fri Nov 08, 2013 9:56 pm

Here's a detailed analysis that answers a lot of the questions being posed in this thread

http://centreforaviation.com/analysi...rting-with-buenos-aires-cut-136900

AR385 · Fri Nov 08, 2013 10:34 pm

Quoting AR326 (Reply 36):
Here's a detailed analysis that answers a lot of the questions being posed in this thread

I don´t get it. The article says SAA needs to restructure badly to survive but at the same time the government seems to be forcing them to keep routes that are unprofitable due to them being "strategically or politically" important. How can they truly restructure with that heavy hand on top? The only routes that seem to make money are the ones to Europe. Yet they are keeping the others except for EZE? Seems like it´s not going to end well.

B-HOP · Sat Nov 09, 2013 5:01 am

Not surpise they lose money in Hong Kong when the plane sits for 12 hour on a 343 that can't get much cargo from JNB. CX makes money on seafood shipped out from JNB, early am arrival then timed it either onto first flights to Japan/Korea/China and local market to arrive on plates before dinner. That is why despite the price of gas, they still keep 744 on the route, as for pax, a lot of it were Chinese labourer going somewhere else in Africa. Would make sense if they go just Hong Kong and let CA codeshare to Beijing and someone else to Shanghai and move deparrture time a little early ex Hong Kong. In New York, just move to EWR, that is a STAR hub, just my 2 cent.

MesaFlyGuy · Sat Nov 09, 2013 5:06 am

Quoting B-HOP (Reply 38):

EWR is also slot restricted, which may pose an issue for SA. We'd have to see if they could find a pair to allow them to operate the flights. Although, if they could secure slots, EWR might not be a horrible thing for SA. Like you said, the Star hub would help them out a bit, but they'd have to see if the O&D passengers (especially the premium ones) would be willing to make the trek out to EWR.

abrelosojos · Sat Nov 09, 2013 5:24 am

Quoting irishayes (Reply 5):
BOM ought to be axed as well. It's simply redundant for SAA to serve this market despite the large volume between South Africa and India - which is frankly far too-yielding and subject to being eaten alive by the GCCs. After forging codeshares with EY and 9W, SA should just abandon serving India on its own metal entirely and route pax via AUH.

= India - RSA is actually does pretty well for high yielding traffic. It just goes via EK.

Quoting behramjee (Reply 10):
a) Operate a daily A346 JNB-BOM-PEK-BOM-JNB and get 5th freedom traffic rights on BOM-PEK-BOM. On this sector, it can code share with both CA and 9W + have a monopoly as no one flies BOM-PEK nonstop for which there is good demand and premium traffic to be exploited. Look at how nicely SAA is performing on IAD-DKR-IAD in terms of S/F.

= I am sorry. This is a terrible idea. They could not make either work on their own, and you want to share a poor 346 and tag it on two mediocre routes?! Local airlines with their POS have not been able to make BOM - PEK work, and you are going to have an airline that clearly can't make each of the local markets work suddenly fly BOM - PEK? This is like 9W somehow thinking they could make PVG - SFO work.

= Besides, as you and I know, getting 5th freedom Africa - India - China is no easy matter

...

Quoting LAXintl (Reply 33):
Government clearly rather force airline maintain unprofitable links to BRICS nations for political interest rather than letting commercial realities dictate the route map.

= And this is fine. I am going to give a highly controversial suggestion -- why does SAA need to make a profit if it does provide a larger social goal? Is EY or QR making profits?

(This view does not reflect what I think of SAA management)

Saludos,
Alex

behramjee · Sat Nov 09, 2013 10:23 am

Quoting abrelosojos (Reply 40):
I am sorry. This is a terrible idea. They could not make either work on their own, and you want to share a poor 346 and tag it on two mediocre routes?! Local airlines with their POS have not been able to make BOM - PEK work, and you are going to have an airline that clearly can't make each of the local markets work suddenly fly BOM - PEK? This is like 9W somehow thinking they could make PVG - SFO work.

= Besides, as you and I know, getting 5th freedom Africa - India - China is no easy matter ...

FYI, ET flies Africa-India-China since many years...ADD-DEL-PEK previously and now ADD-DEL-HGH. As I too stated earlier, this option of mine too will lose money but it will lose less money versus flying BOM nonstop + 3 weekly PEK nonstop as you are killing 2 birds with one stone and maintaining access to both markets on a daily basis + getting 5th freedom revenue on BOM-PEK-BOM which currently sees 22,000 pax annually flying between the 2 cities.

With a new nonstop daily service available with possible CA/9W code share being too thrown into the mix, demand should in turn be stimulated by 30% at least just from BOM but via 9W's domestic India connectivity help that can further rise potentially.

Also I would have loved to have for operational cost saving reasons an A332 being used for this service instead of the A346 but the on board capacity of the A332 is too small to cater to the needs of both market segments combined in one flight hence why I opted for the A346 as you are getting almost 40% more capacity on board at approximately 17% higher operational costs.

In addition, operating 3 weekly JNB-PEK nonstop is not competitive versus the multiple daily convenient one stop options now available via HKG/BKK/SIN/DXB/DOH/AUH etc.

abrelosojos · Sat Nov 09, 2013 11:20 am

Quoting behramjee (Reply 41):
FYI, ET flies Africa-India-China since many years...ADD-DEL-PEK previously and now ADD-DEL-HGH. As I too stated earlier, this option of mine too will lose money but it will lose less money versus flying BOM nonstop + 3 weekly PEK nonstop as you are killing 2 birds with one stone and maintaining access to both markets on a daily basis + getting 5th freedom revenue on BOM-PEK-BOM which currently sees 22,000 pax annually flying between the 2 cities.

= I am well aware of what ET does. You should know that ET has route rights on Africa - India - China. South Africa or (say) Nigeria does not

.

Quoting behramjee (Reply 41):
With a new nonstop daily service available with possible CA/9W code share being too thrown into the mix, demand should in turn be stimulated by 30% at least just from BOM but via 9W's domestic India connectivity help that can further rise potentially.

Also I would have loved to have for operational cost saving reasons an A332 being used for this service instead of the A346 but the on board capacity of the A332 is too small to cater to the needs of both market segments combined in one flight hence why I opted for the A346 as you are getting almost 40% more capacity on board at approximately 17% higher operational costs.

In addition, operating 3 weekly JNB-PEK nonstop is not competitive versus the multiple daily convenient one stop options now available via HKG/BKK/SIN/DXB/DOH/AUH etc.

= Well. You are far more optimistic about these than I am it seems.

Saludos,
Alex

SA7700 · Sat Nov 09, 2013 11:31 am

Quoting behramjee (Reply 41):
nonstop is not competitive versus the multiple daily convenient one stop options now available via HKG/BKK/SIN/DXB/DOH/AUH etc.

Not to be pedantic, but some users may construe this statement as fact that TG flies daily between BKK-JNB-BKK, which is not the case.

Thanks and regards,

SA7700

behramjee · Sat Nov 09, 2013 11:49 am

Quoting abrelosojos (Reply 42):
= I am well aware of what ET does. You should know that ET has route rights on Africa - India - China. South Africa or (say) Nigeria does not .

yes am aware as the Nigeria-India bilateral has not been re-negotiated for over 20+ years LOL . It still is 2 weekly Nigeria-India nonstop flights permitted using nothing larger than an A310 :P Obviously this shall change soon as Nigeria-India market size is as big as Nigeria-China now. FYI, BOM-LOS sees 48,000 pax per year now and DEL-LOS 40,000. Both markets see bigger demand than PEK-LOS (32,000) where as CAN-LOS is 49,000 pax !

As far as South Africa-India bilateral is concerned, I am not aware of the beyond rights, only that SAA is allowed to operate up to 14 flights per week into India with 5600 seats. However there is no harm in lobbying for beyond 5th freedom rights and hoping for a positive outcome. Like I said earlier, I am just merely giving a suggestion and the nitty gritty stuff such as obtaining traffic rights etc is under someone's responsibility to handle.

PlymSpotter · Sat Nov 09, 2013 12:42 pm

Quoting mercure1 (Reply 6):
So airline says it identified 4 markets that lose $55mil USD annually and government only allow then to cut 1 route at $5mil savings.

SA is a cancer patient and needs major restructuring, not a little aspirin.

This is where state ownership comes into play. How much income do these four 'loss making' routes directly bring to the South African economy, income which you can say with reasonable certainty would be lost without the flights.

Quoting LAXintl (Reply 33):
You might want to re-read.

PEK is losing $30mil.

That's a lot for an airline, but if it generates twice that for the economy, then you can see the rational for keeping it. $30m is one good sized trade deal, it's not difficult to add value back that way.

Dan

qf2220 · Sat Nov 09, 2013 1:17 pm

Quoting qf002 (Reply 22):
Given the profit sharing, metal neutral JBA that SA has with QF, and the fact that QF is making money out of JNB, it's fair to assume that SA is as well. Any route that is turning a profit has to be one of their stellar performers if they really are in such bad shape (which I don't doubt they are).

I dont think there is a JBA between SA and QF. IIRC it is a 'hard block' capacity purchase agreement where each airline purchases capacity on the aircraft of the other carrier (at contracted rates) and markets it as its own. If it doesnt sell the seat, it wears the losses. I wouldnt call this a profit share.

SA7700 · Sat Nov 09, 2013 1:29 pm

Quoting qf2220 (Reply 46):
I dont think there is a JBA between SA and QF. IIRC it is a 'hard block' capacity purchase agreement where each airline purchases capacity on the aircraft of the other carrier (at contracted rates) and markets it as its own. If it doesnt sell the seat, it wears the losses.

That would be correct. It is a "hard block" capacity purchase agreement. See the following article.

The code-share agreement involves South African Airways pre-purchasing a fixed block of seats on Qantas's services between Sydney and Johannesburg.
The price paid for the seats is determined by the equivalent percentage of Qantas's total costs of a flight. South African Airways carries a loss if it does not sell enough seats to cover the cost of the pre-purchased block of seats.

Qantas wins approval for extension of South African code-share deal

Regards,

SA7700

airbazar · Sat Nov 09, 2013 1:46 pm

Quoting jfk777 (Reply 20):
Peking is being operated to please China, SAA needs to stop being the AR of Africa. Buy or lease some 777 and ditch the 4 engine A340

That would be a sure way to kill SAA for good, due to the limitations that the 777 has when flying out of JNB. The one thing they have done right was to keep the A340 as their long haul aircraft. The A340's will eventually be replaced by more capable twins.

Quoting AF022 (Reply 24):
My anecdotal evidence is that the flights are full up front very frequently, and that their fares are very high. Even with payload penalty this flight cannot be a dog.

The problem with SAA is not that the route doesn't generate enough yield to be profitable but that the airline probably doesn't know how to make money even on high yielding routes. And it also has absolutely nothing to do with flying an A346.

Quoting Stitch (Reply 31):
If South Africa's economic relationship with China generates more than $5 million a year, it could very well be worth having SAA absorb the loss in continuing to operate the route.

That's a point worth making. With state run airlines, there's a much larger picture to look at. One could argue that, that is the reason why so many state run airlines don't turn a profit. There are too many ulterior motives and intangibles.

Quoting PlymSpotter (Reply 45):
This is where state ownership comes into play. How much income do these four 'loss making' routes directly bring to the South African economy, income which you can say with reasonable certainty would be lost without the flights.

I'm not saying this is an excuse to have a terribly run airline. I'm just saying that when looking at the big picture, the country/government may be making a lot of money somewhere else, as a direct result of keeping unprofitable routes. I don't know that that is the case. I'm just giving an example.

speedbird128 · Sat Nov 09, 2013 2:26 pm

Quoting airbazar (Reply 9):
i don't believe SA's losses have much to do with the markets or routes they fly to. I think awfully poor management and special interests are the cause.

I've been flamed before for saying it, but you're 100% correct. If SAA got free fuel and planes they'd still be in the red.

They have received around R17 BILLION in handouts and are still screwing it up. It is just like other parastatals, one way cash flow based on current interests.

And then their is this constant bitching from SAA about an inefficient fleet. We've heard it all before. The 742/3 was a gas guzzler. Got the 744. The 742/3/4 was a gas guzzler. Got the A343/6. Now they are gas guzzlers. Got the A332. And want A350.

Same on short haul fleet. Chopping and changing. A30B/B732. Then A320. Then B738. Then A319/B738. Now A319/A320.

Go ask Comair Ltd how to turn a profit with old metal. They only (relatively) recently started adding B738 to their stables.

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