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Why 1time failed

Nov 11 2012 12:27 Jacques Pauw and Jacques Dommisse, City Press

Blacky Komani, 1time chief executive. (Beeld)

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Cape Town - Budget airline 1time ignored a plan that could have returned it to profitability within months, charges an aviation consultant and forensic investigator with access to the airline’s records before it crashed and burned.

Christo Ebersöhn, who was appointed by trade union Solidarity in September to assess the viability of the ailing airline, charged that the airline wasted millions because of poor management decisions by 1time’s founders and its current owners.

Ebersöhn’s probe – in which he was given full access to the airline’s records – produced a shocking indictment of the airline’s operations.

Ebersöhn said he and his team presented 1time – under business rescue until its provisional liquidation with short-term debt of R320m this week – with a plan to turn a six-month loss of R18m into a six-month profit of R40m.

But, he said, the plan by his team – which included a chartered accountant, who is also a commercial pilot; and an economist who consults in the aviation industry – was not even acknowledged.

“I am very upset that our proposal wasn’t even considered,” said Ebersöhn.

“I think by then they’d made up their minds that the airline must go under.”

1time group CEO Blacky Komani and the court-appointed liquidator Aviwe Nyamara did not respond to requests for comment on Ebersöhn’s report.

Fin24's sister publication City Press is in possession of a summary of Ebersöhn and his team’s report and correspondence to the business rescuers working with the company.

Ebersöhn said that both the old and new management – 1time was taken over by a BEE consortium last year that was funded by the Industrial Development Corporation (IDC) – had no clue about running a budget airline.

In his report, Ebersöhn said: “It is appalling to see that management incentives are paid out annually in a struggling company where there is no structured performance measurement or any accountability.”

Ebersöhn and his team found:

  • 1time subsidiary Jetworx employed 422 maintenance staff to maintain the airline’s remaining seven aircraft;
  • 1time poured money into Jetworx to keep it afloat. Staff had little to do and only 70 were, in effect, actually working;
  • The airline needed no more than 35 maintenance staff, and should have lowered its salary bill for Jetworx from R2.5m a month to R600 000;
  • Five aircraft of 1time’s fleet were already grounded and were “cannibalised” to keep the others in the sky;
  • 1time pilots flew only 50 hours a month, compared to SAA and Comair pilots who fly up to 100 hours a month. 1time could have saved R11m on pilots over a six-month period;
  • The airline was plagued with poor credit and risk management, and large amounts of money were wasted, and;
  • “Lack of knowledge and basic incompetence has resulted in major corporate and financial risks being overlooked and not migrated,” said Ebersöhn in his report.

“Things that are important like corporate risk and cash flow management are left at the mercy of less important matters like complaining and blaming uneconomical MD80 aircraft,” the report reads.

Meanwhile, Andries Ntjane, the deputy director for licensing and permits at the transport department, confirmed that a consortium consisting of 1time founders Rodney James, Glenn Orsmond and Johan Borstlap (former MD of Sun Air) had applied for a licence to operate a new budget airline.

The department had scrutinised the application but still had questions about several issues, including the applicant’s previous involvement with 1time, Ntjane said.

Orsmond and James said they were “saddened” by the failure of the airline and the job losses it had brought.

They said the airline had failed for a number of reasons, among them the high oil price, exorbitant increases in airport taxes, losses at Jetworx over the past year and the inexperience of the management team which had replaced them.

Orsmond said: “My departure 14 months ago followed on the heels of the founding directors losing control to the current consortium.

“I differed with the new team and board on the appropriate strategy going forward and expressed concerns regarding certain corporate governance issues.

“Nevertheless, my parting was amicable, based on handshakes all round and mutual good wishes,” he said.

“I am extremely proud of our record at 1time over the seven years we ran the group,” he said.

- City Press

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1time  |  blacky komani  |  low cost airlines
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