SA Express: Maintaining the bottom line

South Africa’s aviation sector remains buoyant in the face of rising costs, global recession and competition. If proof were needed, the story of SA Express in recent years is an endorsement of a well-run business, enjoying steady revenue growth over the past eight years.

080615-BOMB-064The state-owned airline came into being in 1994, as the new South Africa began to embrace the culture of Black Economic Empowerment, and was put together by a group of Canadians and Thebe Investments, a black-owned investment house.

Ramon Vahed, General Manager in charge of Maintenance, Engineering and Fleet Development, takes up the story:

SA Express was set up as a feeder airline to SA Airways and one of its primary functions was to convey passengers from the smaller airports in the country, to the larger ones and strengthen the network”.

Today our flights are incorporated within the strategic alliance with Airlink and South African Airways and we are a fully-fledged commercial scheduled airline.”

Vahed himself has worked in aircraft engineering and maintenance for over 19 years, including a four year stint in France. He returned to South Africa in 2005 and has worked at SA Express for the past seven years.

He has overseen a period of consistent growth and change at the airline and his experiences have given him an excellent broader perspective of the business:

Compared to say Europe, we are a relatively small airline, but we are third largest in South Africa and our market share is approximately 11 per cent of the domestic market.

We are 100 per cent state owned and ultimately controlled by the Department of Public Enterprise; making us a sister company to SA Airways.

SA Express is headquartered at OR Tambo International Airport in Johannesburg and operates secondary domestic routes from ten airports. It also operates regional international flights to destinations such as Botswana, the Democratic Republic of Congo, Maputo, Namibia and Zambia.

The company operates a fleet of 50 and 70-seater aircraft which are both jet and turbo props and as Vahed explains, is currently going through the process of upgrading its range:

We currently run ten CRJ200s, five CRJ700s and nine Q400s (which are turbo prop aircraft). We are in the midst of fleet renewal; the Q400s were acquired for a total investment in the region of R1 billion and have all been secured on 10-year operating leases, although the lifespan of these aircraft can extend beyond 30 years.

080615-BOMB-098These aircraft have been brought in to replace our previous –Dehaviland Dash 8 – 300s and we have invested significant amounts since 2006 (when we acquired the first two Q400s) in training for our pilots and maintenance teams as well as support infrastructure.

We are still reviewing our jet fleet of choice to replace the existing 50 and 70-seater aircraft and we are looking at 80-seater options; if we looked beyond 100-seater, we would be into different territory.

The need to increase capacity on flights suggests an increase in demand from passengers – and Vahed is happy to confirm this point:

There has been roughly an 11 per cent passenger growth over the past year and we carry around 1.7 million travellers each year now. A lot of the growth can be attributed to the relative cost and convenience of flying; all airlines are working very hard to keep their costs down and as disposable incomes have increased, people have enjoyed greater access to flying. Whilst Europe and much of the world has suffered at the hands of a double dip recession, South Africa has not been as impacted. At the moment approximately 65 per cent of our passengers are business-oriented, with the rest comprising of leisure and visiting friends and relations.”

A further indicator of the growth and popularity of SA Express has been the development of more routes over the years. Two important contributors to this ongoing success come in the shape of safe, reliable aircraft and stellar customer service. The former aspect is of course very close to Vahed’s heart:

Overall we have about 1,000 employees, but our technical department accounts for 326 of these. We operate at all of the major airports in South Africa and our main maintenance centre is based at OR Tambo International Airport, where we have four hangars for storage and maintenance of aircraft and equipment.

We also have a hangar in Cape Town and smaller operations in Bloemfontein and Durban; in total we occupy around 10,000 square metres of space. Most of the maintenance takes place in Johannesburg but we are a full scope maintenance organisation which involves amongst others preventative, scheduled and unscheduled maintenance at all sites.”

Given South Africa’s rich pedigree in aviation, Vahed indicates that finding the right skills is not too difficult and SA Express has a dedicated training department which assists apprentices and new employees in attaining full qualified maintenance engineer status.

We provide a lot of internal training as well as send staff on international courses which are crucial given our work with companies like Bombardier,” he asserts. “We run an apprentice training programme and it takes about three years to reach full maintenance engineer level. However to gain certification to release aircraft to service takes on average another five years or more, depending on ability.”

The Bombardier connection has been significantly reinforced in recent months, with the announcement in November that the aircraft giant has appointed SA Express as its First Commercial Aircraft Authorized Service Facility in Africa.

This agreement will benefit not only SA Express, but the country as a whole, as it has the potential to create extra jobs and skills training opportunities. At company level, the appointment will increase our experience and credibility and of course it also increases our third party capabilities.”

The New Year promises to be an exciting one for SA Express, as Vahed looks ahead to further opportunities:

We have objectives for growth in the whole region, so agreements like the Bombardier one, may offer opportunities, given their geographical footprint. That aside, 2013 is going to be a year for cost containment and we have to adapt to the rising costs and return the business to sustainability and make our cash flow situation stronger.

We will strive to do this through improving efficiency both through the airline and the maintenance departments and we can perhaps succeed through strengthened partnerships. The government’s aviation portfolio includes a group of companies that have committed to working closer together to find the best model regarding spending.”