SAA Technical Targets African MRO Opportunities

Now that South African Airways Technical is set to remain part of government-owned South African Airways Group for the foreseeable future, CEO Wellington Nyuswa is taking a fresh approach to staff turnover and considering expansion into regional jet support.

Understanding where South African Airways Technical (SAAT) is now involves rewinding the clock by five years. SAAT’s main client, South African Airways (SAA), entered business rescue in December 2019 and suspended scheduled flights when the COVID-19 pandemic hit. SAA only resumed operations 18 months later in September 2021, radically downsized from 49 aircraft to just six narrowbodies. SAAT was not part of the business rescue process, but it was affected by non-payment from SAA and its low-cost carrier Mango, as well as lost work from SAA’s downsizing, triggering a restructuring at SAAT.

“Post-COVID, we started with 60% of our revenue coming from third parties and only 40% coming from the airline,” Nyuswa says. “As SAA builds up, those numbers are shifting, but we still have more than 40% coming from third parties.”

The reshaping of SAA meant SAAT was one of the few MROs with capacity to help third-party airlines return aircraft to service from long-term storage after the pandemic. “We were also one of the few that have [European Union Aviation Safety Agency and FAA approval]. It was easy to respond, especially on the widebodies,” he says.

Nyuswa notes that Africa basically has “five or six” major MROs, but they perform limited third-party work because their core focus is supporting their group airline. “Now that we have spare capacity as SAA Technical, we can intentionally do this. We have regional as well as international customers that come to us because we've got slots. The same cannot be said for the other big airlines that didn't shrink [their operations] as much,” he says. “They have growth prospects, and they actually need more facilities, more technicians and more materials.”

Another hangover from the pandemic relates to higher cycle aircraft. Most African airlines operate “tried and tested aircraft types,” Nyuswa says, giving African MROs plenty of experience supporting older variants.

“The aircraft types that we have on the African continent are fairly old,” he says. “We have mastered the art of maintaining them, we are comfortable with them and they are reliable as well. That has resulted in Africa keeping aircraft that are a bit behind, not updating the fleet … this has pushed us to not invest in MROs, because we're doing what we do best. There was no challenge [for] us. We were quite comfortable.” 

However, post-COVID, the supply of new aircraft and spare parts has become strained. This shift has coincided with older aircraft hitting heavy checks. “The aircraft cannot be replaced, whether you like it or not, because the OEMs cannot support the demand, which means the aircraft that we have now have more complex work that needs to be done, from landing gears to engines,” says Nyuswa.

Meanwhile, African operators with more modern fleets are facing their own challenges, with “misbehaving” modern-technology engines requiring premature shop visits. “African MROs haven't had enough time to actually understand how these engines behave and be skilled enough to manage them in terms of the maintenance plan that has been provided by the OEM,” Nyuswa says. “Because you haven't developed that capacity, it's only natural that your engine then goes overseas.”

Nyuswa sees this as an opportunity for African MROs. “If we do not do it, someone else will. We have seen interest from the European MROs and OEMs to come to Africa. Basically, they are seeing what we are not seeing, and we owe it to ourselves to actually take that opportunity,” he says. “If we do nothing now, we definitely will not be able to capture that demand.”

Meanwhile, the African fleet mix is changing, creating scope for SAAT to broaden its services. “We have seen an increase in regional jets,” Nyuswa says. “This is an area that we need to look into. We are situated at the tip of Africa, with workshops that can do wheels and brakes, line maintenance and so on. They're just quick wins. This is a market that we would like to tap into quite seriously. Do we see ourselves going into jet engine shop overhauls and so on? Not in the near future. That is highly capital intensive.” 

Instead, SAAT will focus on line and component maintenance, and developing its existing workshops. Nyuswa says Airbus A220s are one of the types that SAAT is looking to get more involved with beyond line maintenance.

Broadening the business is now an option for SAAT, after several years of uncertainty. In March, the South African government abandoned the sale of 51% of SAA to strategic equity partner Takatso Consortium, drawing a line under a process that had lasted nearly three years. This means the government will retain 100% ownership of SAA for the foreseeable future, giving SAAT some ownership stability. 

“SAAT is profitable,” Nyuswa says. “We are self-sustaining. The shareholder only gave us funding on the premise that we will rely on our own blood, sweat and tears going forward.”

One of the areas that Nyuswa is looking to develop is SAAT’s skills pipeline. In September, SAAT sought 100 new staff, attracting more than 4,000 applicants. “The response was overwhelming,” Nyuswa says. “We were able to get the cream of the crop.” While SAAT is understaffed, Nyuswa says the company does not actually need 100 new starters. Over-recruitment forms part of his new strategy, aimed at managing staff attrition.

“It's more than what we need, but because other airlines and other countries are poaching our very skilled employees, we have decided we need to supply the market,” Nyuswa said. “The view is ‘train, train, train.’ Do not look at your needs. Do not look at your demand currently. Look at what the country needs, look at what the continent needs and then train this.”

This means young aspiring staff can leave and develop their expertise elsewhere, and potentially return with more skills and experience. “Let's allow them to grow,” he says. “We cannot pay the salaries that are paid by the Middle East and others. We will, however, do our bit to retain our technicians or mechanics to the extent that we can afford.”

Developing new local MRO facilities and competencies is capital intensive. African companies have limited access to financing, so Nyuswa sees partnerships as an obvious way forward. “There are a lot of promises and exchanging of business cards,” but these often fizzle out before they reach the workshop floor because the “nuts and bolts” do not work, he says. Nyuswa adds that he does not know of any African MRO partnerships that are operational and effective. “There are a few MROs that we work with,” he says. “It's usually at an AOG level, but beyond that there's nothing tangible.”

This lack of action is partly caused by financial and administrative barriers. “It becomes very difficult to finance MROs if they are still attached to the airline itself,” Nyuswa says, because traditional banks assess the MRO’s shareholder and the parent airline might not be performing well. However, if MROs decide to partner instead, it is difficult to secure joint finance when there is no shared ownership.

In 2021, Kenya Airways and SAA announced plans to form a strategic partnership, including ambitions to ultimately form a pan-African airline group. However, this fell by the wayside because both carriers needed space to focus on their own restructuring. “Look at SAA plus Kenya [Airways], for instance. That collaboration is one of the many that we actually need,” Nyuswa says. “The businesses themselves, the executives themselves, may have a viable case, but because of their ownership and the laws that apply in each country, it becomes very difficult.”

Nyuswa says current and historic government ownership also creates hurdles to working together. “It's difficult to make such decisions and also move with speed,” he says. “Anything that we do, in terms of shareholder changes and everything, must go to parliament and so on and so forth. It makes the process a little bit difficult. Therefore, this is why we try and look into arm’s-length business transactions.”

For example, he sees scope for African MROs to share components and to become continental specialists in particular aircraft types. “To be honest with you, we do have trust issues amongst ourselves. We are very territorial,” he says. “That's just a traditional reaction, but if you look at the bigger picture, you must be willing and able to forego that which we are not best at—but you must also be able to perfect and absorb more of what you are good at.”

WORKING WITH THE OEMS

Airbus and Boeing have been very supportive of SAAT, especially when it comes to aircraft issues, but CEO Wellington Nyuswa would like to see African MROs being more involved in new aircraft programs.

SAAT and Airbus currently have a project underway to review SAAT’s internal processes and identify efficiency improvements. Nyuswa hopes this relationship will grow so SAAT becomes a “go-to” Airbus MRO in the southern hemisphere.

“We need to be honest about what we can achieve; we need to be honest about our abilities, but we also need to showcase the resources and potential that we have,” he says. 

One of the issues is that modern aircraft types have reinvented how MRO is performed, rendering some workshops in dire need of modernization. “Technology has moved. The aviation industry has moved. The MRO industry has moved. We use data analytics now to do inspections. We also use artificial intelligence. We use drones to do inspections,” says Nyuswa. “It's accurate, it's quicker, it's safe, it reaches areas quicker than a human being. So, there's a shift. Even without the demand, we need to improve on that.” 

This trend means some landing gear, engine and components work is migrating overseas, cannibalizing the developing African MRO market.

“It's very difficult to fabricate spares and components. There are a lot of intellectual property issues,” Nyuswa says. “We need to get into that space where we can work with OEMs, get the trust, get to be part of the production process, so that the business case is more solid than us just moving their components from the aircraft to back to the OEM, or to other MROs.”