Thursday, June 17, 2021

SAA code share with Emirates ongoing – even as flag carrier is in limbo

The code share agreement was seen as offering passengers more choice.

The code share agreement was seen as offering passengers more choice.

  • SAA’s code share agreement with Emirates still continues.
  • SAA is, however, not collecting royalties from it, according to the rescue practitioners.
  • An “enhanced” code share agreement between the two airlines was supposed to help with SAA’s turnaround.

Even though South African Airlines (SAA) has been mothballed since May 2020, its code share agreement with Middle Eastern Airline Emirates continues.

On Monday, SAA’s business rescue practitioners confirmed this in response to a query from Fin24.

The practitioners said that when an airline enters a codeshare with another airline, it’s customary to announce this by stating that flights are conducted in “in proud association with” the codeshare partner.

“Emirates being the operating carrier with SAA the marketing carrier,” said the rescue practitioners.

This followed a letter from a Fin24 reader, who said during a flight on Emirates from Dubai to South Africa in December, he was surprised to hear an announcement made upon landing that the flight was done “in proud association with SAA”.

No royalties

Asked whether SAA collects royalties from Emirates for the code share, the rescue practitioners said it does not.

An “enhanced” code share agreement between the two airlines was announced in December 2018. They said at the time that the aim was to expand their strategic cooperation, opening up new destinations for both.

The original codeshare agreement between SAA and Emirates was already signed in 1997, across a wide spectrum of commercial and customer touch points.

The expanded code share was supposed to enable the two airlines “to explore and leverage synergies between ourselves in a much more enhanced relationship of mutual benefit”. 

SAA’s route network and that of Emirates were seen as complementary.

At the time, then SAA CEO Vuyani Jarana said the expansion of SAA’s partnership with Emirates would further strengthen key focus areas of the implementation of SAA’s turnaround plan.

The code share agreement was seen as offering passengers more choice, flexibility and ease of connections to a wide range of cities via Dubai and across more points in Southern Africa. 

Emirates launched operations to South Africa in 1995 with flights between Dubai and Johannesburg. Its code share agreement signed with SAA in 1997 was Emirates’ first ever codeshare agreement. It meant the SAA code started to appear on flights operated by Emirates to Dubai.

Mothballed

SAA has been in business rescue since December 2019 and effectively “mothballed” since May 2020. The rescue practitioners could still end up having to say that the state-owned airline’s rescue plan is not financially viable anymore and unimplementable. Then they would be forced to liquidate the airline because the business rescue process could not serve its purpose anymore.

SAA’s creditors accepted the rescue plan in July 2019 and Finance Minister Tito Mboweni allocated R10.5 billion – taken from various other budgets – for implementing the plan. Towards the end of last year, the DPE provided R1.5 billion from which pay-outs are already being made to members of those unions who accepted the three-month back pay offer. The department has also given members from the other unions the option to accept in their individual capacity.

Members of the SAA Pilots’ Association have been locked out by the rescue practitioners since 18 December 2020. A lockout is a mechanism an employer may apply and is the opposite of a strike. The rescue practitioners want Saapa to agree to cancel their current regulating agreement and accept new terms of employment. A lockout means an employer is not obliged to pay salaries from the date of the lockout.

Furthermore, unlike other unions represented at SAA, Saapa, as well as the National Union of Metalworkers of South Africa (Numsa), and the SA Cabin Crew Association (Sacca) have not yet signed an offer of three months’ salaries as full and final settlement of backpay. The rescue practitioners stopped paying SAA employees their salaries in May, claiming they had no more money to do so.

The DPE, SAA’s shareholder, has indicated there simply is no more money other than the three months’ backpay it is offering now.

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