Next month South African Airways will invite Airbus and Boeing to submit Requests for Proposals for SAA’s total fleet review, according to the airline’s commercial GM, Theunis Potgieter.

He says SAA is looking at replacing its A340-300s and A340-600 aircraft used on its international routes with New Generation B787s or the B787 Family range, or A350s or the A350 Family range, as these offer better fuel efficiency.  He says SAA expects the proposals from the manufacturers by the end of the year, while completion of the fleet renewal depends on the availability of aircraft.

Potgieter says SAA already experienced a 20% revenue increase this past year by using more fuel-efficient and route-appropriate aircraft in line with its long-term growth and business optimisation strategy. However, the rise in fuel prices resulted in a R1,3bn increase in its fuel bill last year, meaning fuel increased from 32% to 40% of its total costs last year.

He says other constraints on SAA include exorbitant airport fees, a drop in passenger demand and costly catering services. Like its African counterparts, SAA is also earning revenue in a weaker currency while its costs are US-dollar and euro-based.  It is also facing a premium on fuel prices in many African destinations and restrictive access to highly regulated markets on the continent, for example Angola and Mozambique.

While global profit forecasts are expected to fall further this year, SAA believes this is cyclical and is taking a larger view, says Potgieter. “We are using our fleet better and have sold more seats in 2011/12. Compliments on our service and performance are up 10%, while complaints are down 13%. Incidents of misplaced or misdirected bags have decreased by 8%.”

Meanwhile, SAA is talking to government about what it believes is unfair competition from carriers such as Emirates on some routes. “There needs to be a more realistic allocation of capacity linked to demand that exists in the market,” Potgieter says. Stiff competition from Emirates severely impacted SAA’s Cape Town-London Heathrow operation. Despite 70% load factors, high fuel prices and competition have made the route unsustainable for SAA, which is cancelling its the service in mid-August. Potgieter says SAA tried everything to make the route work, including decreasing its services from seven to five a week; improving the product; reviewing its partnerships; restructuring its sales teams; and engaging with the UK over visa requirements for South Africans. He says fares on the CPT-LHR route are substantially lower than on the JNB-LHR leg and Johannesburg attracts higher yield business-class travellers.