Sunday, January 16

SAA to take to the skies (again) soon


FIFI PETERS: Today South African Airways opened its ticket system to prepare again for takeoff next month. SAA will start flying again on September 23 after 15 months of being on the ground due to the blockade and the business rescue process.

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We have SAA interim CEO Thomas Kgokolo online with us. Thomas, thank you very much for giving us your time. I wonder if you’ve been tracking sales today when it reopened.

THOMAS KGOKOLO: Good evening, ma’am, and good evening to your SAA listeners and clients. I’ve just been to board meetings and there are a lot of things we still have to put together. So I haven’t really had a chance to track sales, but possibly will towards the end of this week.

FIFI PETERS: I thought with interest, as everyone has heard the news and is taking in the news that SAA is back. But he returns at a very difficult time for the economy, as he just said. The fight against the pandemic continues. You may even possibly have a higher cost base if you look at what the current price of oil is doing. So what is the short-term outlook for the business?

THOMAS KGOKOLO: Thanks for the question. I agree with you that we are coming back at a difficult time. That is why you will see that we have started a process in terms of the path that we would like to follow in the future. At the national level, you will see that we are doing Cape Town and Johannesburg. We have analyzed the data and analyzed the demand in the market, and we are confident that, at this stage, Cape Town is the best of all the routes that we see in South Africa. Therefore, you will see that we are not doing that and other cities in the country.

What we did then, we also went to the region and looked at things like the Covid vaccination rate in some of these countries. We also look at Covid load factors during closures to date. And that is why you will see that we want to explore markets like Maputo and Harare, because we have seen numbers that are not bad either.

More importantly, we have analyzed the competitive landscape and found that there are not many players in that region, of course, due to the challenges posed by the market there; and we also have a better chance of competing in that particular space. So we’re pretty comfortable with that …[2:38] Private routes give us the opportunity to re-enter the market with optimism, but also to be very cautious because the situation is quite volatile and extremely uncertain.

FIFI PETERS: It’s quite interesting that Nigeria isn’t on your immediate list of places to go. When you talk about competition, it seems like a lot of players are interested in the continent’s opportunity, Thomas. Qatar is expanding its presence here, as is Emirates, although I understand they have a co-chair with them. How do you essentially plan to stand out in terms of competition?

THOMAS KGOKOLO: The truth is that I was surprised that when the team model did the route we are going to start on, Nigeria did not. I think it’s with the gulf stream …[3:20] blocking constraints and demand capacity there, and not really …… on our top five routes that we select.

In terms of our approach to the market there ……[3:34], we will put prices in the market that are very clear and easy to understand. What we will also do, we will improve customer service to make sure that the level of excellence that we are known to offer, we will excel better at that.

…… [3:53] Also, what we want to do, we want to do more consolidation and collaboration, so the likes of Emirates that we share with, we want to continue those particular partnerships. As you can imagine in these uncertain times, sometimes it is better to collaborate. So we are also looking to collaborate.

Which we will also do from a Voyager offering point of view, we also have some interesting offers there, so that those loyal members who have been a part of the Voyager program can get some benefits from that too.

But in the long run, let’s get back to what we will do, reconfigure our fleet and make sure it can match the value proposition that we will bring to market. At this stage, this is basically how we are going to compete in the market and we would improve as the market opens.

FIFI PETERS: Will it come back as a profitable airline or how long is the road to profitability in your forecasts?

THOMAS KGOKOLO: Of course, I think one of the challenges is that outside of the business rescue process, we were in care and maintenance, and during care and maintenance we incurred some costs. So we are already on the defensive in terms of profitability. But what we did, we made sure that the routes we select at least during these abnormal times cover their own operating costs so they don’t lead to balance sheet losses.

So we feel pretty comfortable that if the market develops the way it does now, we will actually have routes that allow us to be active, while ensuring that our contribution margins are not eroded by that.

But I think that for us to start predicting when we will be profitable, we have to say that the market needs to open up to targeting where international travel is now functional, and we hope that in the next 12 months we can see that as nations start to vaccinate. , which they will then begin to be able to model …… [5:41] we see a much more informed profitability than where we are now.

FIFI PETERS: So will you need help from your main shareholder, which is currently the government? Or is the current deal on the table that you are deliberating with your new equity partner about something that will prevent a potential bailout by the SAA taxpayer?

THOMAS KGOKOLO: Our expectation is that the business will come out of the corporate rescue with the intention of restarting it. And with that intention of restarting the ……[6:12] In the future, a strategic capital partner will enter that will contribute resources such as finances and also technical competence. The government has made it clear that there will be no money in the future to recapitalize SAA. So, we understand that yes, indeed, the strategic equity partner will join in and help us with the ……. [6:32] for the airline to be sustainable in the future.

FIFI PETERS: And where is that process with Takatso?

THOMAS KGOKOLO: Good question. In fact, they issued a statement today to indicate that they are now at the stage where they are considering the SAA purchase agreement. So on our side with ……. good on supporting due diligence, and now I think it’s just a matter of them seeing the buy-sell agreement and of course the DPE (Department of Public Companies) examining this process and …… being responsible for issuing communications on future development in that regard.

FIFI PETERS: And any idea how long all of that could take?

THOMAS KGOKOLO: I don’t have an idea, but all I know is that some of these things can be complex and we have to be patient. We’ve done a lot of work so far, and I think there’s only a couple of yards left to go.

FIFI PETERS: And what can you tell us about Mango and its business rescue process, and how is your relationship with the workers there, given that they took you to court?

THOMAS KGOKOLO: Of course it has been a very difficult relationship with the workers and you can see the frustration of the workers for not getting paid. But I think we have covered some ground in terms of having the BRP on board. And BRP has really closed that gap by consulting with workers, consulting with creditors and basically with the companies under BRP’s care. And then he would …… communicate in terms of the way forward around wages, creditors and also Mango’s business plan.

FIFI PETERS: Only on the issue of paying your workers, who has been paid and who has not? Or perhaps more specifically, have the SAA and Mango riders been paid, or have they not?

THOMAS KGOKOLO: We must be very careful when looking at these two entities. They are two separate entities with two separate governance processes. SAA has been paying its employees, and on Mango’s side, because it is a separate entity that is funded differently, of course what we found is that Mango started having cash problems, and during those particular months they have been at the place where employees have not been paid. Therefore, we must treat them separately from a governance perspective, of course.

FIFI PETERS: Well. Thomas, thank you very much for your time, sir. That was Thomas Kgokolo, the acting CEO of SAA.


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