Pretoria - Running an airline isn’t for the fainthearted. Returns on capital investment are running at 4 percent and less. The profit margins are hovering at about 1 percent and IATA, the international aviation authority, is showing a marginal decline year on year for the start of the year.
But when you’re running South African Airways, it’s a different ball game all over again – ask Nico Bezuidenhout, the founder and chief executive of SAA’s low cost airline Mango, who is yet to celebrate his 40th birthday. He’s back in the hot seat for a second time at the embattled national carrier, after keeping the chair warm for the man he would replace 18 months later, Monwabisi Kalawa.
“It was Warren Buffett who said if he had been there when the Wright brothers were inventing their aircraft, he would have shot one of them out of the sky,” Bezuidenhout remarks wryly from his chair in the hotel lobby in Abu Dhabi, where he has just overseen SAA’s inauguration of a brand new route. Sunday’s inaugural flight SA 278, with a wide berth into the Indian Ocean and around the Arabian Gulf to avoid war-torn Yemen, follows hot on the heels of the closure of the strategically important, though horrifically unprofitable, Beijing and Mumbai routes.
Bezuidenhout’s been back in the hot seat at Airways Park, SAA’s headquarters right next to OR Tambo International Airport, since the start of November last year, fighting battles on almost every front – including allegations that he lied about his university qualifications.
The story was leaked by the DA, which claimed Bezuidenhout had falsely claimed to have a B Comm in transport economics and industrial psychology from the erstwhile Rand Afrikaanse Universiteit.
It’s something that rankles with Bezuidenhout to this day. He terms it “unfortunate” before explaining: “I never lied about not finishing my degree. I don’t mind people questioning other people’s academic qualifications, but I have a fundamental issue about being called a liar.
“You know, the same people who turned on me (in November) were the exact same people who were saying I was the right person for the job when I acted the first time.
“It doesn’t matter,” he says, “my day will come.”
It’s a hypocrisy that hurts.
Bezuidenhout never applied to work at SAA. He was headhunted by the company to start up its e-commerce business after founding and then selling the country’s first online ticketing agency, ticketweb, at the age of 24.
After succeeding with the airline’s e-commerce portal, he was sent off to sort out the domestic operation and then to establish the in-house low cost operator, Mango.
His success has been such that he’s been asked to stand in twice at the parent airline.
It’s Mango that continues to inspire him today. “I’ve enjoyed really good support from the top team at SAA, but my team at Mango never get enough credit. Their success and ability to work on their own frees me to do what I’m doing now. I can’t speak often enough about my team there. That little orange airline carried as many passengers as SAA did domestically in December.
“That’s my track record.”
In the meantime he’s putting his head down and ignoring the naysayers as he tries to turn SAA around and make it profitable, while ordinary South Africans wonder if SAA is going to become another problem child state-owned enterprise like Eskom. It’s a comparison that makes Bezuidenhout bridle, even if he concedes it’s inevitable.
“There’s a huge difference between us and Eskom. SAA is an exceptionally good company operationally, even if we are inefficient, which must change.
“One of the biggest problems facing SAA is the issue around job creation. Does that mean employing more people or being financially sustainable and contributing to the economy and job creation that way? That’s one of the issues we have to answer, because we can’t do both.”
A competitive market is a reality that Bezuidenhout has to live with all the time. If SAA get its pricing wrong or under-delivers on service or misses flight schedules, passengers vote with their feet. And Eskom? “Against who does Eskom compete? Their price points are public revolt; they keep pushing them until they can’t anymore.”
SAA doesn’t have that luxury, instead it’s back to basics; asking hard questions and finding answers. The senior managers are excited about having a chief executive, albeit an acting one, who understands the industry after enduring at least six chief executives in the last decade, some of whom had no experience of aviation other than being passengers in the back of the aircraft.
One of these strategies is the rare double of having relationships with both Emirates and Etihad, respectively the biggest airline in the world and the fastest growing one. Both operate out of the United Arab Emirates; Emirates from Dubai and Etihad from the political capital Abu Dhabi. They’re national carriers without any of the constraints that other national carriers face because of what Bezuidenhout terms “the unity of purpose by government”. It’s a single-minded determination to use the carriers as fundamental drivers for the UAE’s growth. “Dubai and Abu Dhabi are inextricably linked to the carriers, so much so that they won’t give landing rights to competitors. The governments stand right behind them, which is why Emirates is the biggest and Etihad is the fastest growing.”
Uniquely, SAA is the only carrier in the world with good relationships with both of them – at the same time.
The Etihad relationship though is the one which Bezuidenhout is banking on. “SAA is an end of hemisphere carrier, like Qantas, whereas the Gulf region is a natural hub for air traffic. There’s a reason why all three Gulf airlines are booming, and Turkish airlines too, it’s because of their geography.”
It’s this geography which SAA will piggy-back on to provide passengers with one-stop solutions into the Far East and beyond into Asia.
“Beijing and Mumbai were strategic routes for SAA in terms of Brics, but as a company, if you don’t have the tools, it’s not a strategic imperative. SAA didn’t have the right equipment type for the ultra-long routes. It cost us a billion rand in equity over three years, but over that time the trade grew commensurately between China and India and South Africa thanks to SAA.
“We’d love to have the routes back again, but we can’t pursue a developmental agenda if it’s not financially viable. Access to Etihad’s network will add 35 worldwide destinations across India, South East Asia, China and the Gulf Region, with Air China starting to fly directly to Johannesburg three times a week from May. SAA will continue to service Hong Kong directly, but will fly to Abu Dhabi every day, with reciprocal direct flights by Etihad.”
Bezuidenhout’s plan is to shrink SAA a little bit, making it become profitable and then growing it again from there. This means cutting unsustainable ultra-long haul routes, aggressively boosting its African network and driving through efficiency at all levels of the operation, whether in the air or on the ground. “For an airline, it’s horrible to cancel routes. That’s why it’s great to be here in Abu Dhabi opening a new one for a change,” he says.
* Kevin Ritchie was in Abu Dhabi as a guest of SAA
Pretoria News