• Skip to main content
  • Skip to primary sidebar

Ad – Bottom Content

Payload Asia

South African anchors in Africa, but eyes Asia

Payload Asia

Leaderboard

  • Home
  • Latest News
  • Channels 
    • Carriers
    • Aircraft Manufacturers
    • Airports
    • Courier & Mail
    • Freight Forwarders
    • Express
    • Ground Handling & Cargo Terminals
    • Logistics
  • 11th Payload Asia Awards
    • Winners Circle – 11th PLA Awards
    • About
    • Categories
    • 10th Payload Asia Awards
    • Winners Circle – 9th PLA Awards
    • Winners Circle – 10th PLA Awards
    • Awards Gallery
  • Subscribe
  • Advertise
  • More 
    • Event Calendar
    • Directory
    • Contact Us
Share

South African anchors in Africa, but eyes Asia

March 18, 2013 by PLA Editor

For SAA Cargo its future is first and foremost being substantially shaped from within, as the stateowned carrier grapples with devising a turnaround plan to reverse growing debt and management uncertainty in order to inject vitality and a new strategic vision into the 79 year-old carrier.

Addressing the South African Parliament’s Portfolio Committee on Public Enterprises – effectively the carrier’s owner – on the airline’s annual report and financial statements recently, SAA representatives, led by acting chairperson Duduzile Myeni, said the strategy would take SAA into the next 20 years. “I urge you to have faith in the national carrier,” Myeni implored his political overseers.

A turnaround plan will be crafted from the best elements of about nine or ten proposals compiled over the past decade by the carrier. The committee was also told that candidates had been shortlisted for the position of SAA CEO, a position vacated through a series of resignations and terminations in the highly politicised job.

Speaking at the committee hearing, acting CEO Nico Bezuidenhout said that SAA had lost ZAR12 billion (US$1.32 billion) in capital over the past 10 years, of which at least ZAR9 billion was lost through fuel hedging, he said.

“We are beyond the point of denial. There has to be a way of moving forward, hence the turnaround strategy,” Bezuidenhout said, adding there would be no “piecemeal approach” as SAA crafted its new strategy.

Cargo optimism

The Speaking to Payload Asia on the sidelines of the Air Cargo Africa exhibition and conference in Johannesburg in February, South African Airways Cargo general manager Tleli Makhetha and the cargo division’s head of sales, Auriel Newman exhibited a calm confidence that decisions being made, on among other things fleet renewal, will also take into consideration the goals and aspirations of the cargo department. What is key, according to Makhetha, is that the future strategy of the airline has taken into full account the importance of cargo to the overall success of the airline.

“There is a much more inclusive decision making in so far as South African Airways is concerned, it is taking more cognizance of the cargo business which is an integral part of the planning process.” Indeed a key part of the turnaround plan involves developing a long haul fleet plan, of which a decision is imminent. Although the details have yet to be released, what is clear is that the carrier will be increasing its number of long haul aircraft which will involve taking on either Airbus or Boeing wide-bodies.

“We did an assessment of both suppliers and it could go either way – but if we look at the markets we serve – our passenger side is developing their strategy alongside our belly requirements,” said Newman.

“We work closely and with regards to how the whole cargo plans evolve, our passenger side has a very collaborative relationship with us, so as part of their long haul fleet planning they have information from us to ensure that each traffic lane has sufficient capacity to meet our demands as well.”

Makhetha added: “What is important for cargo is what is going to happen to the passenger fleet because as we introduce into our medium-haul routes into West Africa – in particular with wide-body passenger aircraft – that will naturally give us the belly capacity and its actually an easier way into those markets than with a freighter.”

Currently the airline has a passenger fleet of 53 aircraft – a mix of A319/320/321, A330, A340 and B737 aircraft – flying to 11 international destinations and 26 destinations on the African continent from its hub at Johannesburg’s OR Tambo International Airport.

The carrier also has four short-haul freighters – two B737-200s and two B737- 300s – which it operates predominantly in the Southern African Development Community (SADC) region (a socioeconomic, political and security grouping of 15 southern African states).

Currently the carrier uplifts nearly 140,000 tonnes of cargo per annum – of which 70 per cent is belly capacity and the remainder maindeck. Makhetha says this will increasingly change in favour of belly as the carrier undergoes wide-body fleet expansion.

Network expansion

With South Africa’s export economy predominantly centred on automotive and perishables exports, much of SAA Cargo’s main trade is on the SADC region and the traditional Africa-Europe trade lane with London, Frankfurt and Munich comprising the only three European gateways the carrier serves.

A significant network expansion occurred last year when the carrier began operating a weekly non-stop Johannesburg-Beijing service three times a week using A340-600 equipment. Although this opens up interesting possibilities for the cargo side, cargo options can be severely constrained by the fact it’s a 15.5 hour flight which places severe cargo weight restrictions because of fuel requirements.

But overall Newman says it has been reasonably good so far and in February the cargo division put a record cargo onboard of 32 tonnes. Not good news for the passenger side as it means load factors upstairs were thin, but she says this is an inherent problem on the route as load factors are inconsistent partly due to the movement of migrant workers.

India is also performing well, she adds, with the carrier recently increasing frequencies on its Mumbai service to daily, using A330-300 aircraft. The interesting difference between India and China, Newman notes, is that: “India requires frequency, whereas China requires volume”.

Clearly this first foray into North Asia with Beijing service has generated excitement in the group with Newman saying there is a desire for more. “We would like to expand into Asia more and I think it’s part of the plan on the passenger side to develop Asia more, but it all depends on how the passenger markets recover.” This could include, she says, Singapore or maybe Bangkok.

When asked whether this keen interest in Asia along with early cargo successes constrained by limited belly capacity could see SAA Cargo move into larger, longer range freighters, the answer is a clear “no”, at least for the foreseeable future.

“It’s all driven by trade flows,” notes Makhetha. “If the volumes are there one would consider it,” he says, adding that really it’s the imbalance issue that is the potential deal killer. “And imbalances are not just about volumes, but also about the commodities, because obviously different commodities give you different rates.

“For freighters, long haul freighters in particular, you have to make sure you’ve got it absolutely right. You may fill the aircraft in both directions, but one way you might fill it with low yield cargo and then suddenly the economics don’t work.” The two cargo executives also reference the very pertinent debate going on right now in the air cargo industry – whether long haul freighters have life ahead of them in light of the ample belly capacity of modern, wide body aircraft.

Africa focus “For now our emphasis is pretty much on Africa,” Newman adds, pointing to the carrier’s dominant market share in the southern African region. “We pretty much have SADC in the bag with about an 80 per cent market share in this region and now our growth – for freighters at least – is pretty much within the African continent.” Indeed this is the core of SAA Cargo’s strategy going forward. “Developing east and west hubs and feeding in and out of offline points – that is our focus for now,” she says.

“It depends on how markets pan out, but our intentions are that we have at least one hub in West Africa,” with Lagos and Accra two of the possibilities, she says. East Africa is more challenging, she adds, because of the over-capacity on that lane, predominantly Nairobi.

“And so in developing the hub it’s based on whether we can get the connectivity rights into off-line points and this is where the trade imbalances on points outside of Nairobi and East Africa are more challenging than in West because the market sizes are much smaller than in West. But developing hubs in both East and West is very much in the cards,” Newman emphasises, probably in the next two or three years with West Africa first, followed by East Africa.

“East, we can work on some partnerships in the short term, but in the medium term we would be looking at our own hub.” More freighters are clearly in the works to support this hub expansion, something larger than the current B737 shuttle fleet. “Hopefully in the next 2-3 years we should get another two midrange in – either B757 or B767 – anything with a 6.5 hour range,” Newman added.

Competition

Aside from the general market downturn, which Africa has somewhat avoided because of the improving economic conditions across large swaths of the vast continent, a key problem for SAA is competition. Makhetha describes it as “really, really rampant,” noting that the South African authorities take the view that they are not going to protect the national airline, “so we have moved quite far away from a protectionist regime.” “It’s a very open skies type atmosphere.

There are still bilaterals so the market is not unregulated, but the point is that entry into South Africa is not overly restrictive,” he says adding that “almost every global airline flies into OR Tambo.”

“Our challenge is to remain competitive in this very open market and taking into account the size of our economy – we don’t have the biggest economy in the world, we have an ambitious economy, but not the biggest –competition is a real issue for us. And because of all the capacity that is in our market, especially outbound, the whole question of yields and rates is a challenge because all this competition is suppressing yields,” says Makhetha.

In reality SAA Cargo’s two-fold challenge is not unique: “To maintain market share, but also to ensure we maintain yields to make our business sustainable. We tend to cooperate with a lot of airlines that are not flying in direct competition,” and sometimes this even means cooperating with what he terms the ‘mega-competitors’ like Emirates, with whom SAA Cargo has an interline agreement.

“Our approach to competition is that it’s there, we live with it and where we can leverage on our competition then we do that, but we have to be very careful that we don’t do it at our expense.” Currently the cargo carrier has interline agreements with over 40 carriers, predominantly in Asia, but also spanning the globe.

“It’s amazing because the people that knock at your door are the people you sometimes least expect, but it’s an open market,” he says.

Makhetha notes that where the carrier is doing well, is in offering more consistency than its competitors. “The problem with the Africa market is that people jump in and they jump out. We want to be the ‘Coca-Cola of Africa’ – reliable and consistent. Consistency in the market is our ‘trick’ – we avoid cancelling our freighters and would rather go with a low load factor because at least our customers can plan based on our frequency, because we know customers are developing or maintaining a trade link with someone else. We want to be known for that consistency.”

Looking ahead at this year Makhetha sees a recovery taking shape, “very, very slowly”. Indeed, only last year did SAA Cargo get back to anywhere near the pre-2008 levels he added. “We are now looking at a more steady growth at around five per cent in terms of volumes over the year which is on average for Africa where growth is projected at around 5-6 per cent.”

Other Topics: Air & Cargo Services, air cargo, Air Cargo Asia, air cargo freight, Air Forwarding, air freight, Air Freight Asia, Air Freight Logistics, air freighter, air freighting, Air Logistics Asia, Air Shipping Asia, airlines cargo, airways cargo, asia cargo news, but eyes Asia, cargo aviation, South African anchors in Africa

Related Articles

  • Xeneta reports resilient air cargo market despite July IT outage
  • Lufthansa Cargo presents commitment to transforming the aviation industryLufthansa Cargo presents commitment to transforming the aviation industry
  • cargo handling services of Vienna AirportLufthansa Cargo continues to rely on the cargo handling services of Vienna Airport
  • exclusive commercial rights on first key laneVietjet Air Cargo, Teleport deepen partnership with exclusive commercial rights on first key lane
  • Budapest Airport Revolutionises Cargo Operations With Kale Info Solutions’ Airport Cargo Community System
  • RTX Pratt And Whitney's West Palm BeachRTX’s Pratt & Whitney announces GTF MRO capacity expansion at West Palm Beach facility

Ad – After Content

Primary Sidebar

Trending News

  • APL Logistics opens first-of-its-kind flow-through center in Jakarta 154 views

  • Singapore Airlines Group continues progress on decarbonisation journey with Neste and World Energy agreements 145 views

  • Changi Airport Terminal 5 breaks ground 125 views

  • 2024 marks record air cargo year for Vienna Airport: 22% cargo growth with 15.3% increase in pharma handling compared to the previous year 115 views

Payload Asia Awards

Subscribe To
Our Newsletter



Payload Asia continues to be the authoritative source for informative, accurate and up-to-date news and information on the air cargo industry and related sectors.

With its updated and refreshed look the online edition continues to provide high quality coverage on the Asia-Pacific, India-Middle East, Europe-CIS, North & South America and Africa air cargo markets.

© 2024 Harvest Information. All rights reserved. Privacy Policy

Partner Sites : Asia Food Journal and Television Asia Plus .

We use cookies and similar technologies to improve your browsing experience.
Continuing to use this site means you agree to our use of cookies. I agreeRead More
Privacy & Cookies Policy

Privacy Overview

This website uses cookies to improve your experience while you navigate through the website. Out of these cookies, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may have an effect on your browsing experience.
Necessary
Always Enabled

Necessary cookies are absolutely essential for the website to function properly. This category only includes cookies that ensures basic functionalities and security features of the website. These cookies do not store any personal information.

Non Necessary

Any cookies that may not be particularly necessary for the website to function and is used specifically to collect user personal data via analytics, ads, other embedded contents are termed as non-necessary cookies. It is mandatory to procure user consent prior to running these cookies on your website.

Analytics

Analytical cookies are used to understand how visitors interact with the website. These cookies help provide information on metrics the number of visitors, bounce rate, traffic source, etc.

Performance

Performance cookies are used to understand and analyze the key performance indexes of the website which helps in delivering a better user experience for the visitors.

Advertisement

Advertisement cookies are used to provide visitors with relevant ads and marketing campaigns. These cookies track visitors across websites and collect information to provide customized ads.

Save & Accept

Stay Updated!

Subscribe now to receive the latest news, updates, and exclusive insights. Don’t miss out!

 

By submitting this form, you consent to receive marketing emails from Payload Asia. You can revoke your consent to receive emails at any time by using the SafeUnsubscribe® link, found at the bottom of every email.

Disclaimer: Translations on this website are automated using Google Translate. While we strive for accuracy, please be cautious, as machine translations may contain errors. For critical or sensitive content, consider seeking professional human translation. We are not liable for any reliance on the translated content.

1