South African Airways is back on a proposal to partner with Ethiopian Airlines as SAA struggles with losses. The plan first presented in June 2019 proposed a strategic partnership between the two airlines, with headquarters in Johannesburg.
The turnaround strategy also urges the South African Government to offload its shares in the carrier, alluding to little strategic value.
Former SAA CEO Vuyani Jarana drafted the five-month-old document, proposing that the government should exit the airline business.
“Given the thin margin nature of the airline business, under government control or government rules, it is unlikely SAA will deliver better margin performance. The government should consider exiting the airline business,” read Jaran’s plan in Sunday Times.
While Lufthansa and Emirates show potential as future partners, Ethiopian Airlines provides the opportunity to expand into West Africa.
“The biggest opportunity is to grow the West Africa hub together where traffic throughout Africa is consolidated, before connecting to the US and Canada,” Vuyi Jarana
Under the joint venture, SAA will provide cabin crews, whereas Ethiopian Airlines will sublet SAA planes. Additionally, Bloomberg states that the joint venture will seek to establish its presence in Mumbai, Bangkok, and Tokyo.
South African Airway’s Nosedive
South African Airways is at the brink of bankruptcy, as the airline last made its profit in 2011. Moreover, its financial condition worsened after it cancelled bookings due to workers demand for more money.
Insurance companies have lost faith in the airline. For instance, Sanlam Ltd.’s Travel Insurance Consultants said it would exclude SAA from their insolvency cover. Besides, Flight Centre Travel Group (Pty) Ltd does not sell SAA tickets anymore.
The proposal of a Pan-African airline is one effort to cut the airline’s losses.