Carolus: SAA needs to think big | Fin24

Carolus: SAA needs to think big

Sep 26 2012 18:58
Johannesburg - SA Airways needs to think big in order to recognise its potential, chairperson Cheryl Carolus said on Wednesday.

"We need a bolder vision, where we are not going to be apologetic. We must be bullish and occupy the space that we believe exists for us," she said, in an interview in Johannesburg.

Carolus was confident government would agree to the airline's recapitalisation, at an estimated cost of between R4bn and R6bn, which she acknowledged was a substantial amount of money in a tough economic climate.

This would enable the airline to strengthen its balance sheet and order new planes.

"It's a tough fight and so it should be... I expect Minister [Pravin] Gordhan to be a tough negotiator," she said, adding that as a taxpayer she expected value for money.

An agreement was expected "in the next few weeks".

"The reason why we're not there is simply because it's a very complex conversation," she said, adding that the airline and government was "significantly on the same page".

Carolus said the money would be for a recapitalisation, rather than a bailout of the kind SAA had needed in the past in order to pay debt.

The airline had shown incremental growth under new CEO Siza Mzimela, with improved load factors and small profits over the past two years.

However, for the 2012 financial year, SAA had a fuel bill which was R2.2bn higher than the previous year.

"This year, we are heartbroken... but every airline in the world has suffered the same fate," she said.

SAA's results have not yet been released for the year.

Labour relations had improved markedly, Carolus said, with executives forgoing bonuses and salary increases, and pilots agreeing to a symbolic 1.5% increase despite being entitled to 11%.

This, she said, was unheard of in both South Africa and the rest of the world. Further, the airline had not had to deal with strike action in three years.

SAA's fleet was not appropriate for its current growth markets, as it was optimised for European destinations with up to 12 hours' flying time, rather than cities in Asia or the United States which were 16 hours away.

As the national carrier, SAA had to support South African trade, investment and tourism.

The international best practice was to focus on neighbouring markets, particularly in Africa, she said.

South Africa's location, at the southern-most tip of Africa, had previously been considered a disadvantage in aviation terms, but it was now perfectly positioned for the Brazil, Russia, India, China, and South Africa (Brics) trading bloc.

"We need to demonstrate those markets are growth markets. We believe we should be first movers in many of these markets. There are advantages but also risks. It's high risk, but like any business, it's high return."

This year alone, the airline added several new routes, to Bujumbura in Burundi, Ndola in Zambia, Kigali in Rwanda, Cotinou in Benin, Abidjan in Cote d'Ivoire, and Ponte Noir in the Republic of Congo, while closing unprofitable routes.

It now offered 10 flights a week to Sao Paolo, in line with increasing trade with Brazil.

SAA's disadvantage here was that its older planes offered less fuel efficiency and were not always suitable for longer-haul destinations.

Despite increasing demand, it could only offer three direct flights to Beijing, as only one of its planes could make the journey.

SAA's competitors within Africa and the Middle East had far more modern fleets, with better fuel efficiency.

"We are being overtaken by state airlines from countries with much smaller GDPs than ours," she said.

Both Air Kenya and Air Ethiopia would, by year's end, boast far more modern fleets than SAA.

Though she would like SAA to expand its business class service, in line with rising demand, Carolus herself is not an airline snob.

"When I was high commissioner [for South Africa] in London, I flew all over Europe on Ryanair," she said, adding that low-cost airlines were particularly important for the leisure market.

Her mother still preferred flying Mango, as she could bring her own food, and Public Enterprises Minister Malusi Gigaba was a fan of the airline's wireless network connectivity.

SAA's current board has almost finished its three-year term in office.

Carolus would not be drawn on whether she would be available for a new term in office.

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saa  |  cheryl carolus  |  air travel


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