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Johannesburg - The government is not only expecting South African Airways (SAA) to be profitable, but also to play a developmental role. However, to do that the airline needs support from the authorities.
Monwabisi Kalawe, the new chief executive of SAA, said people in some circles think it is not as important for SAA to be commercially successful, as long as the airline delivers the trade and tourists that the country’s economy needs. The carrier’s board is however unwavering in its demand that SAA return to profitability.
Kalawe spoke on Wednesday night about his first 100 days at the helm of SAA. He was the guest speaker at the launch of the alliance of Talent Africa, a local human resources group, with the listed American group Korn Ferry.
Kalawe explained that the carrier’s local services, as well as the regional routes in Africa, are profitable, but that the intercontinental routes are suffering huge losses.
To turn that situation around it is essential to terminate services on some of the biggest loss-making routes, such as Buenos Aires and Beijing, which cost the airline in the order of R300m per year each.
The government agreed to terminate the service to Buenos Aires in March, but not the Beijing route because of China’s importance as a world economic power and South Africa’s involvement in the Brics - Brazil, Russia, India, China and South Africa - grouping.
“To continue with such loss-making routes it is important that a system is devised for treasury transfers to subsidise those services. Discussions about such a possibility are currently taking place.
He said although most of the proposed turnaround plan for SAA was drafted before his appointment as chief executive, he would have proposed the same solutions in 95% of the cases.
The plan was a joint effort by senior executives and board members who contributed many hours of their time without getting paid for it. In an effort to get this plan off the ground, a turnaround office was established.
One of the most urgent matters that had to be addressed was to fill important vacancies in the executive committees, which had left a big void in the carrier's management. All these positions are now filled with top class people, according to Kalawe.
He said contrary to perceptions, SAA does have excellent, hard-working staff who are serious about their work. The carrier’s excellent safety record is evidence of that.
Staff morale was however seriously dented by constant changes at board and executive level, and much work has to be done to put that right. Productivity can also be improved in an effort to cut costs, but sustainable savings of about R1bn per year have been identified and implemented.
One of Kalawe’s goals is to improve customer service. “Although SA was voted the best airline into Africa once again by the travel industry, this does not mean that we cannot improve our service drastically.
“Airlines have become a service industry. All the airlines offer the same seats and routes, and it is often small things like Wi-Fi or friendly service when there is a problem, that differentiates between the airlines.”
He warned that SAA’s poor balance sheet will always be a stumbling block until there is a capital injection from the shareholder. “Current discussions with the authorities are about how big such an injection should be, and not if it is needed.”
Kalawe said SAA is also pushing hard for more fuel efficient aircraft, because fuel is the biggest cost item.
He said rand weakness also created major problems, as 60% of SAA’s cost and only 40% of its income is dollar denominated, but hedging is for now not the solution to currency volatility.
- Fin24
Monwabisi Kalawe, the new chief executive of SAA, said people in some circles think it is not as important for SAA to be commercially successful, as long as the airline delivers the trade and tourists that the country’s economy needs. The carrier’s board is however unwavering in its demand that SAA return to profitability.
Kalawe spoke on Wednesday night about his first 100 days at the helm of SAA. He was the guest speaker at the launch of the alliance of Talent Africa, a local human resources group, with the listed American group Korn Ferry.
Kalawe explained that the carrier’s local services, as well as the regional routes in Africa, are profitable, but that the intercontinental routes are suffering huge losses.
To turn that situation around it is essential to terminate services on some of the biggest loss-making routes, such as Buenos Aires and Beijing, which cost the airline in the order of R300m per year each.
The government agreed to terminate the service to Buenos Aires in March, but not the Beijing route because of China’s importance as a world economic power and South Africa’s involvement in the Brics - Brazil, Russia, India, China and South Africa - grouping.
“To continue with such loss-making routes it is important that a system is devised for treasury transfers to subsidise those services. Discussions about such a possibility are currently taking place.
He said although most of the proposed turnaround plan for SAA was drafted before his appointment as chief executive, he would have proposed the same solutions in 95% of the cases.
The plan was a joint effort by senior executives and board members who contributed many hours of their time without getting paid for it. In an effort to get this plan off the ground, a turnaround office was established.
One of the most urgent matters that had to be addressed was to fill important vacancies in the executive committees, which had left a big void in the carrier's management. All these positions are now filled with top class people, according to Kalawe.
He said contrary to perceptions, SAA does have excellent, hard-working staff who are serious about their work. The carrier’s excellent safety record is evidence of that.
Staff morale was however seriously dented by constant changes at board and executive level, and much work has to be done to put that right. Productivity can also be improved in an effort to cut costs, but sustainable savings of about R1bn per year have been identified and implemented.
One of Kalawe’s goals is to improve customer service. “Although SA was voted the best airline into Africa once again by the travel industry, this does not mean that we cannot improve our service drastically.
“Airlines have become a service industry. All the airlines offer the same seats and routes, and it is often small things like Wi-Fi or friendly service when there is a problem, that differentiates between the airlines.”
He warned that SAA’s poor balance sheet will always be a stumbling block until there is a capital injection from the shareholder. “Current discussions with the authorities are about how big such an injection should be, and not if it is needed.”
Kalawe said SAA is also pushing hard for more fuel efficient aircraft, because fuel is the biggest cost item.
He said rand weakness also created major problems, as 60% of SAA’s cost and only 40% of its income is dollar denominated, but hedging is for now not the solution to currency volatility.
- Fin24
