Over the past two days I’ve been directly exposed to the enormity of the challenge facing SAA in its quest for rebirth. The country’s cadre-abused, severely downscaled national carrier’s mission is to re-establish itself as the leading airline in Africa. Right now, that looks like an impossible dream. Let me explain.
A few weeks ago BizNews’s accountant, who has an eye for a bargain, recommended Qatar Airways. Book early, he told me, and you fly Business Class from Joburg to London for the same as a Premium Economy ticket at usual suspects BA and Virgin. Going via Doha means it takes longer, he added, but the upgraded experience justifies that extra time.
As usual, our Hanno was on the money. The latest was easily the best of literally dozens of flights to the UK, enough of them in the ‘turn left’ cabin to afford a comparison. In-flight wi-fi ($10 for each leg) a closed off cabin, plentiful tea and day-time flights turned my seat into a comfortable replica of my office.
___STEADY_PAYWALL___The service was exceptional, as you might expect from a company which recruits globally (the hostie, a Philippino, referred to 140 nationalities). I’m a tricky customer because of an unusual but debilitating allergy to garlic that arrived a couple years ago.
Inadvertent consumption of the popular herb could send me to hospital. It’s a very real risk, especially when you realise how often these cloves are applied to spice up normal offerings (next time you’re at Woolies, check the ingredients list on prepared foods and you’ll appreciate how the French favourite has infiltrated our food world.)
Qatar Airways sailed through my personal test. Its in-flight team and on-ground restaurants went the extra mile to protect me from hive city. In its airy, attentively-staffed Doha lounge – which even outshines Turkish Airways’ equivalent in Istanbul – the chef stopped my sauce-free steak order after checking spices in the meat’s marinade (they included my nemesis).
One final point worth mentioning. I mislaid my Apple Airpods during the Joburg/Doha leg. Being South African, thought that was the last I’d ever see of them. But as they cost R4k, thought it worth a try and reported the loss to the Lounge. In a couple of hours they’d been found and delivered. Maybe I shouldn’t be amazed at such honesty and efficiency. But was.
Before you get the wrong idea, this is not about Qatar Airways. Rather, it’s highlighting the benchmark against which SAA will have to measure itself when re-opening global routes, a stated intention. Winning back customers now exposed to truly excellent alternatives will be tough. While SAA was fighting its existential battle, the global competition got even better.
I’m rooting for our national airline. Its new 51% private sector shareholder, the Takatso Consortium, is chaired by Tshepo Mahloele, whose media business Arena is the only outside shareholder in BizNews. He’s more than a business acquaintance. Ditto Takatso’s CEO Gidon Novick, a man I’ve known, admired and been friendly with for decades.
From on- and off-record discussions with both, they’re under no illusion about the task. Unfortunately, many other South Africans don’t share their grasp of reality. Despite there being no other credible bidder for SAA, self-appointed experts keep carping on about Takatso having been ‘gifted’ the airline.
That’s pure, unadulterated bunk.
The deal with Mahloele’s consortium is consistent with what owners of distressed assets seek when finally throwing in the towel (think SAB’s sale of OK Bazaars to Whitey Basson for R1). Their best result is securing a partner with expertise and confidence, a high risk-appetite and a funding commitment, which in Takatso’s instance is a chunky R3bn.
Those empty vessels who loudly proclaim Takatso should have made a substantial up-front payment to take SA’s massive loser off taxpayers’ hands are being mischievous – or deliberately ignorant.
From Government’s perspective, Public Enterprises minister Pravin Gordhan had a very weak hand. He was fully aware that without Takatso’s interest SAA would surely have gone from business rescue to liquidation. That would have triggered the immediate repayment of billions in SAA’s government-backed debt, creating a destructive domino effect elsewhere.
Under the circumstances, Gordhan negotiated well. He retained 49% of the company for the State. That ensures taxpayers participate in any upside with zero additional obligations. Plus, he secured special preference shares whoch will be redeemed from the first R3bn in free cash flow generated by SAA i.e. ahead of Takatso recouping anything for its money or effort.
In addition, Gordhan extracted a politically useful Golden Share to ensure ‘transformation goals remain uppermost’; that SA remains a national carrier domiciled in the country; and a guarantee that SAA’s chairman and at least one of the top three executives (preferably all) are South African.
There’s also a potential payday for the fiscus down the line with a proposed listing for the airline when conditions allow. Given the bargain struck by his colleague, it’s little wonder finance minister Enoch Godongwana last week publicly voiced National Treasury’s support of the transaction.
The man who rapidly steadied the ship after Nenegate has once again done his nation proud. Considering the complexity, Gordhan removed a millstone from Government’s neck with due haste. It’s not yet a year since Ramaphosa’s cabinet approved Takatso as its strategic partner. Progress to date is akin to warp speed by public sector norms.
After a hiatus of 18 months, SAA has been back in the air since 23 September last year. But it’s a very different SAA that’s operating today. Four years ago, the airline boasted a fleet of more than 60 aircraft, including some of the biggest in production. Now it is licenced to operate just eight aircraft, most of them old and relatively small (its fleet’s capacity totals just over 1 000 passengers).
Size-wise, the new SAA is less than 1% the world’s largest operator American Airlines, and is a midget compared with those flying South Africans to other continents like Delta (879 aircraft); Turkish (350); Lufthansa (338); Emirates (271); British (267); and my new favourite Qatar (200). In the airline industry, size does count.
The rapid growth and well documented success of the Middle Eastern hub-and-spoke operators Emirates, Qatar and Etihad stems from fortunate geography and massive Statev investment. The airlines also pulled pilots and cabin crew from outside their small populations – many South Africans among them (incl one Capt. Trevor Leigh who led the crew on my Doha/London flight yesterday).
The purpose of this missive?
To provide a context for the long-running, often acrimonious debate informed by low resolution thought. SAA is no slam dunk for Mahloele, Novick and Co. It is a calculated entrepreneurial risk.
Success will require enormous effort and the application of hard learnt lessons from the consortium partners, specialists in running infrastructure and airlines. Plus creativity, flexibility, embracing technology and sticking with a long-term view. They deserve the opportunity to have a go without the dragline of uninformed blowhards.
More for you to read today:
- Warren Buffett Spends Big as Stock Market Sells Off. Berkshire Hathaway loads up on energy stocks as inflation soars.
- Amidst the ruins of ANC rule. RW Johnson on the wider implications of the collapse of our cities and towns.
- Biden, Bezos and Inflation. Could the White House cure be worse than the disease?
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