We were pressured to cancel Mumbai-Johannesburg route, former SAA CEO tells inquiry | Fin24
 
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We were pressured to cancel Mumbai-Johannesburg route, former SAA CEO tells inquiry

Jun 26 2019 15:05
Azarrah Karrim, Fin24

Former South African Airways (SAA) CEO, Sizakele Mzimela, has told the commission of inquiry into state capture of how the board was put under pressure to cancel its Mumbai-Johannesburg route even though it made no sense to do so.

Mzimela has been giving evidence on the Gupta-connected Jet Airways and the relationship between SAA and the Department of Public Enterprises under former Minister Malusi Gigaba.

She said once the decision was taken that SAA would not cancel the route, Jet Airways chief executive, Naresh Goyal, was shocked – she alleged he told her he was given a commitment that the route would be cancelled.

Mzimela said the recommendation to cancel the route was originally considered by the Finance Risk and Investment Committee (FRIC) of SAA, which was signed off by Jan Blake, general manager of Mergers and Acquisitions, as well as Chris Smyth, who was the CEO prior to Mzimela’s arrival. 

She told Deputy Chief Justice Raymond Zondo that the board had serious concerns about the cancellation of the route for several reasons.

Mzimela said some members approached her with their grievances which included, “the pressure that was being put on the board to make a very quick decision in relation to the termination of this route".

She added, “Although there was a proposal put in front of them that indicated that the route was not profitable, they questioned why that particular route was given priority because, at the time, SAA had challenges on a number of its international routes.”

“The key issue was just how it was being rushed," she said, adding that special meetings and committee meetings were being called to try and get the approval through. The board questioned this hasty approach, she said.

According to Mzimela, the proposal to cancel the route reasoned that, “the Mumbai route was a loss-making route and that the team who was putting this proposal forward...saw an opportunity that, in cancelling the route, they could free up aircrafts that could be utilised on other destinations".

“The third point that they tabled as part of the document is that there is Jet Airways that is coming on to the route and their motivation is ... SAA must cancel the route and ... code-share on Jet Airways.”

The board’s view, Mzimela said, was very different.

“They couldn't understand why there was a recommendation to close off the route, given that it was not the only loss-making route or the highest lost-making route.

“They were also concerned about the motivation being based on a code-share agreement with Jet Airways who had actually announced their intention to start flights between SA and Mumbai and [were] raising concerns from a timing perspective [in terms of] why are we rushing? They also raised questions around why only Jet Airways had been considered. Were there no other opportunities to code-share with other carriers as well?”

She added that there was strategic value in keeping the route, as well as “connecting revenue” for the company in terms of connecting flights, which was not mentioned in the proposal given to the board.

These gaps in the proposal prompted Mzimela and her team to put together their own proposal which would go into detail about the aspects that were left out. This proposal recommended that rather than terminating the Mumbai-Johannesburg route, it be improved instead. 

“They could not argue against this recommendation”, Mzimela said, and the decision was made not to terminate the route. A meeting was subsequently held at the Department of Public Enterprises with Gigaba as well as Jet Airways's Goyal.

Mzimela said Goyal was shocked at the decision that the route would not be terminated

"'Who at SAA made the decision to [not] move off the route?'” Mzimela said Goyal asked upon hearing the news.

Mzimela, in turn, asked Goyal who gave him the commitment that the route would be terminated. Goyal then mentioned Smyth's name. 

Mzimela's testimony continues.

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