South African Airways (SAA) CEO Vuyani Jarana said the airline has identified necessary measures needed to restructure the loss-making national carrier. “It is [crystal clear] now what is needed and we have begun to make tough decisions,” he told ATW in an exclusive interview on the sidelines of the recent IATA AGM in Sydney.

In May, the South African government agreed to making a further R5 billion ($407 million) cash injection into the airline, the latest in a series of bailouts after it tripled losses to ZAR5.4 billion for the 2016-17 financial year, which ended March 31.

“Most of our problems are purely in how we address the market,” Jarana said. “We have to be able to pick the upside of market growth; even competition is increasing. It is about how we organize ourselves.”

Jarana, who has been CEO for six months, said his team has focused on re-examining the airline’s strategy and making adjustments based on market conditions.

“We rebalanced the commercial side, implemented network optimization, segmented the domestic network, rationalized routes to Central Africa, [and] reduced frequencies to London to one daily because it was not profitable,” he said.

Restructuring the network, while necessary, is an emotional process for both markets and customers, he said.

“We have to look at the cost base,” Jarana said.

Both margins and the overall businesses of both SAA and LCC subsidiary Mango are improving. But staff reductions are needed to create a sustainable, profitable long-term business, Jarana acknowledged.

“We are overstaffed,” he said. The carrier and its subsidiaries—including LCC Mango, its catering division and SAA Technical MRO services group—have a staff of more than 10,000.

Meanwhile, the carrier’s fleet strategy analysis continues. 

“Some of our [Airbus A340-300/600] four-engine aircraft are becoming a problem with higher oil prices and we must make a [replacement] decision in record time and work on funding the carrier,” he said.

The airline expects to exchange 10 to 15 widebodies. “We are looking to two-engine aircraft, fuel efficiency and better onboard customer expectations,” he said.

Also, four narrowbody aircraft have been transferred from the SAA mainline carrier to Mango.

In the past, SAA has had several strategy variations because of management changes.

“People have never had the will to implement them, but they are doing it now,” Jarana said. “We have lost ground as many airlines have [expanded to] the African continent. Our brand is strong, and airline services are good; we have an opportunity to recover,” he said.

Jarana clarified the culture of the company also must change and people must understand SAA’s transformation. “We are not like a home affairs department; we must take care of costs and have to deliver.”

Even though the 100% government-owned airline has been kept afloat by a succession of financial infusions from the country’s government, he said SAA is “not a state company—we are a commercial business; we must be able to carry out our own operations and compete and succeed in the market.”

Jarana concluded: “I tell the team we must be fit for growth and stop bleeding [financially].” He added SAA should reach breakeven again in three years.

Kurt Hofmann, hofmann.aviation@netway.at