South African Airways (SAA) has closed reservations this week for its non-stop link between Johannesburg and the Argentine capital Buenos Aires, the first major network casualty of its extensive restructuring plan. The struggling national carrier is working through a turnaround plan aimed at returning it to profitability and has admitted all of its long-haul network, which includes services to London, Frankfurt, New York and Beijing, are loss-making.
SAA said earlier this year that some long-haul routes would be axed from its network and it has now confirmed that the South American link will close from the end of the current Northern winter schedule in late March 2014. However, the carrier says it retains a “Full commitment” to continue providing travel options to and from Argentina when the route closes on March 28, 2014 and SAA will offer connection options through partner carriers in South America.
“Before discontinuing any route, SAA takes into account a number of factors that include but are not limited to the possible consequences of stopping flights, with due consideration given to how a particular market can still be served,” said Monwabisi Kalawe, chief executive officer, South African Airways
“Declining passenger volumes and the current economic conditions such as the depreciation of the South African currency against the US Dollar by more than 20 per cent over the last 12 months, and high fuel costs, have played an important role in our decision to rationalise SAA’s long haul network,” he added.
SAA will continue to serve South America via the Brazilian city of São Paulo, a market it currently serves eleven times weekly. In its effort to maintain connectivity in the region, SAA has implemented agreements with fellow Star Alliance partners and other major airlines operating between São Paulo and Buenos Aires, as well as to and from other key South American destinations.
This route closure is a good example of how SAA plans to leverage more of its Star Alliance membership to extract maximum value for its own business through its Long-Term Turnaround Strategy, named Gaining Altitude. SAA’s new approach is to focus on strengthening and expanding partnerships from its own hub airports as well as those of fellow carriers within Star Alliance and will route traffic on thinner markets using its partners’ networks.
SAA currently operates to 42 destinations worldwide with a long-haul network that is linked to all major continents from South Africa through eleven direct routes from Johannesburg to London (Heathrow), Frankfurt, Munich, Mumbai, Perth, Hong Kong, Beijing, New York, Washington, Sao Paulo and Buenos Aires. These services are supplemented by codeshare agreements with 27 other airlines across the markets it serves.
As our sister editorial platform, Routes News, reported last week, the decision to close the link has been met with disappointment at both ends of the route with particularly strong fury from Argentina, with tourism operators there writing to South Africa’s public enterprises minister, Malusi Gigaba, and SAA’s chief executive, Monwabisi Kalawe, lobbying to keep the direct flights.
South African tour operators have also criticised the move. Referencing a Johannesburg-based publication, Routes News reported that inbound operator Rhino Africa Safaris had written its own open letter to SAA’s Kalawe expressing concern at the decision. “We at Rhino Africa Safaris believe that this termination would have grave repercussions, not just for businesses like ourselves, but for South African tourism as a whole,” chief executive David Ryan was quoted as writing.
According to MIDT data, an estimated 20,000 bi-directional O&D passengers flew between Johannesburg and Buenos Aires in 2012, around 35.2 per cent of the total traffic on the route, according to our own analysis. Alongside the point-to-point demand the route has been well supported by strong transfer demand with around 30,000 additional travellers connecting at OR Tambo International Airport in Johannesburg to the long-haul service last year with particularly strong flows to Cape Town and the Asian destinations of Hong Kong, Xiamen and Fuzhou. There were also around 7,000 more passengers that connected in Buenos Aires to other destinations in South America, the largest flows being to Santiago, capital of Chile.
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