SAA has 90 days to take off

2014-11-30 15:30

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Nico Bezuidenhout, the acting CEO of SAA, has 90 days to convince government that the crisis-hit airline has a viable plan.

His intervention plan follows SAA’s unsuccessful application to government for a “going concern guarantee”. SAA has not issued financial statements for the year to March, largely due to “going concern challenges”. It desperately needs the guarantee to raise funding.

Its other options include finding investors to take a stake in SAA, and slashing costs. These could take the form of cutting loss-making routes and finding a solution to the airline’s massively expensive Airbus contracts. Without some, if not all, of these steps, SAA will remain bankrupt.

No guarantee “leaves SAA in a position where it cannot hold an annual general meeting or issue financials”, says Bezuidenhout, the CEO of SAA’s budget airline Mango, whose first two weeks as acting SAA CEO have been dominated by reports, first published last year, that he had lied about his qualifications.

His appointment follows board ructions at SAA, which saw Public Enterprises Minister Lynne Brown replace most of the board and CEO Monwabisi Kalawe take “special leave.”

“My focus is first to present a plan and to implement it. We have resubmitted a going concern guarantee request,” Bezuidenhout says.

He believes SAA is salvageable. “It is time to stop making plans and start implementing them.”

Mango needs SAA to be fixed because it is in a symbiotic relationship with the carrier. Last month, it got R1?billion cash for the first time, but this money is not necessarily for use by Mango because it is part of the SAA group.

Mango carries 45% of the group’s domestic volumes and is its only profitable carrier.

From nothing in 2006, it now has a local market share of about 23%, against SAA’s 25% and Comair’s (British Airways and kulula) 40%.

First on the agenda is getting SAA on the road to solvency by getting the guarantee.

Second is to stem operational losses. Bezuidenhout says he cannot elaborate, but one can assume it would be likely that SAA looks at its loss-making services.

Its Beijing and Mumbai routes, for example, rake in losses of R300?million a year each. The goal is a R1.3?billion turnaround in cost savings and revenue enhancements.

Third is sorting out regulatory compliance matters and fourth is governance, where there are obviously huge issues. Almost the whole board has been replaced, the CEO is not there and governance structures are not in place.

“Consequence management”, accountability and performance management, which are lacking, will be applied. Procurement processes will come under the spotlight.

Fifth is reorganisation of assets. This should make it more attractive to an equity partner who may be interested in bits instead of the whole.

Bezuidenhout has to take a hard took at the fleet. In the past 10 years, SAA has lost R8?billion on aircraft-related decisions, and chief financial officer Wolf Meyer is in Paris now to try to renegotiate parts of the crippling Airbus A320 contract, originally signed in 2002. Impairments on the contract will be about R1.3?billion this year.

The last is communication, which is why Bezuidenhout was prepared to answer a number of serious allegations against him, largely relating to his job at Mango.

The allegations

1. That Nico Bezuidenhout lied about qualifications

No, he did not, he says, and he produced documentation proving it, and his CV with the correct information was lodged with his employers and kept since 2006 and updated in 2010.

In 2013, when he applied for the position of SAA CEO, his qualifications were checked again by an executive search firm.

SAA has admitted it was its own error that degrees he did not have were printed in two annual reports, but it is unclear why Bezuidenhout did not stop the error from being repeated.

Bezuidenhout says at the time, SAA’s financials were late, there was a new board and no information was presented to him to validate.

“I am an executive of Mango, and we have been pushed to ring-fence Mango from SAA. I was not an executive of SAA” and not responsible for its annual report or contents.

2. That his wife, Glynis Bezuidenhout, is an IT executive at Mango who reports directly to him

Yes, she is an IT manager, but does not report to him. Bezuidenhout says she was employed by SAA long ago, “when I was in standard six” and long before Mango’s first flight.

When he joined Mango, he was married to his first wife and they were divorced in 2008. After that, he started a relationship with Glynis and they were married in 2010.

When he started his relationship with her, she was in exactly the same position she is in now, and has received no promotions or additional increases since.

3. That his PA lives in Durban and flies in every day at taxpayers’ expense, and can bump off paying passengers

Yes and no. His PA does fly in daily. Bezuidenhout says she previously worked and lived in Johannesburg, but had to relocate to Durban for personal reasons.

She flies in each day, but sits on Mango’s crew seats. Bezuidenhout says there is no cost to Mango or the taxpayer. This sounds unusual, but Bezuidenhout says it is not if you are in the airline business.

4. That decisions which require board approval are made by Bezuidenhout, strategy director and executive in the CEO’s office, Barry Parsons, and chief financial officer Wolf Meyer

No. Since he became acting CEO on November 7, Bezuidenhout has not signed any contract.

Meyer is in Paris, but only to talk to Airbus to try to sort out the contract.

Fifteen A320s were ordered in 2002 and another five in 2008, 10 have been delivered, two are being manufactured, and Meyer is trying to negotiate better terms for the other eight.

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