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South African Airways maps out austerity plan to remain afloat

Chief Executive of South African Airways, Vuyani Jarana said on Monday that the company was mapping out an austerity plan that would see to job cut to save the airline .
Jarana, who faces the daunting task of turning the flag carrier around, said in Johannesburg that layoffs and other cuts were unavoidable to contend with a draining cost-to-income ratio of 108 per cent.
“SAA cannot carry the same workforce, whether it is pilots, cabin crew or administration,” he told Reuters.
“We have to make some tough decisions to save the airline. There cannot be sacred cows when it comes to SAA.”
He declined to put a number to the job losses, but two sources familiar with his plan said the state-owned carrier was likely to cut between 1,000 and 1,500 people via a combination of layoffs and voluntary redundancies to bring its employee-per-aircraft ratio in line with regional competitors.
The numbers include roughly 300 flight attendants, according to one of the sources. Some of the carrier’s 700 pilots, encouraged to look for jobs elsewhere, have drafted their own severance pay offer to SAA, the second source said.
In a dramatic fall from grace over the past decade, SAA has lost its place as Africa’s biggest airline and a symbol of patriotic pride to become a source of frustration for taxpayers who have forked out more than 30 billion rand ($2.3 billion) since 2012 to keep it in the air.
SAA’s woes are emblematic of the struggles of traditional flag carriers around the world, such as Malaysia Airlines, Air India and Air France-KLM.
These airlines are contending with low-cost rivals and a spike in oil prices, which puts pressure on those with the highest labour and other non-fuel costs.
The problems are also an illustration of the malaise afflicting the airline industry in Africa, whose airlines have the weakest finances and emptiest planes of any region of the world.
Jarana told Reuters he was also setting up other moves to reduce the airline’s 33.5 billion rand operating costs.
According to him, the cut include squeezing suppliers for better deals and cutting back on its number of flights to London from twice to once a day.
The carrier makes its biggest losses on the London route because it faces fierce competitions that expose its inefficiencies.
“My view is that the starting point to getting out of the hole is to stop digging, you stop doing the things that sink you deeper into trouble,” Jarana said in his office near O.R. Tambo International Airport in Johannesburg.