SAA needs more support to return to profitability – CEO

2014-02-06 10:05

The government was not only expecting South African Airways (SAA) to be profitable, but also to play a developmental role. However, to do that the airline needed 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 needed. The carrier’s board is however unwavering in its demand that SAA return to profitability.

Kalawe spoke last 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, were profitable, but that the intercontinental routes were suffering huge losses.

To turn that situation around it was 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 R300 million a 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 were now filled with top class people, according to Kalawe.

He said contrary to perceptions, SAA did have excellent, hard-working staff who were serious about their work. The carrier’s excellent safety record was evidence of that.

Staff morale was however seriously dented by constant changes at board and executive level, and much work had to be done to put that right. Productivity could also be improved in an effort to cut costs, but sustainable savings of about R1 billion a year had been identified and implemented.

One of Kalawe’s goals was 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 would always be a stumbling block until there was 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 was also pushing hard for more fuel efficient aircraft, because fuel was the biggest cost item.

He said rand weakness also created major problems, as 60% of SAA’s cost and only 40% of its income was dollar denominated, but hedging was for now not the solution to currency volatility.

Join the conversation!

24.com encourages commentary submitted via MyNews24. Contributions of 200 words or more will be considered for publication.

We reserve editorial discretion to decide what will be published.
Read our comments policy for guidelines on contributions.

24.com publishes all comments posted on articles provided that they adhere to our Comments Policy. Should you wish to report a comment for editorial review, please do so by clicking the 'Report Comment' button to the right of each comment.

Comment on this story
0 comments
Comments have been closed for this article.

Inside News24

 
/News

Book flights

Compare, Book, Fly

Traffic Alerts
Traffic
There are new stories on the homepage. Click here to see them.
 
English
Afrikaans
isiZulu

Hello 

Create Profile

Creating your profile will enable you to submit photos and stories to get published on News24.


Please provide a username for your profile page:

This username must be unique, cannot be edited and will be used in the URL to your profile page across the entire 24.com network.

Settings

Location Settings

News24 allows you to edit the display of certain components based on a location. If you wish to personalise the page based on your preferences, please select a location for each component and click "Submit" in order for the changes to take affect.




Facebook Sign-In

Hi News addict,

Join the News24 Community to be involved in breaking the news.

Log in with Facebook to comment and personalise news, weather and listings.