High-flyers sought to lift SA Express
Regional carrier’s new CEO struggles to attract top executives
● Siza Mzimela, who was recently appointed interim CEO of SA Express to turn the bankrupt regional airline around, says she is “very disappointed” by the scale of corruption and mismanagement there.
SA Express was grounded by the South African Civil Aviation Authority (CAA) in May, and, two weeks later, Mzimela was part of a ministerial intervention team brought in to fix it.
“We were quite disturbed by some of the things we came across,” she says.
“We found ourselves with contracts that were not commercially viable, and that we should never have entered into.”
Including with SAA.
She blames the airline’s grounding on a complete lack of management accountability. “Everyone was running around trying to do the right thing. Not that it didn’t know what needed to be done, but no-one was taking accountability. Junior staff would ‘escalate’ and that’s where it would end.”
The CAA was criticised by the government for grounding the airline’s planes, but it had “no choice”, she says.
“It had raised the issues but they had not been addressed.”
By that time, SA Express had actually “self-grounded” nine of its planes because it ran out of money to service them. It didn’t bother to inform the CAA of this, however.
When the CAA found out, it decided SA Express’s planes were unsafe and withdrew all its licences.
Only six out of its fleet of 21 are now licensed to fly.
Frantic efforts are being made to have licences for another six planes returned, but there is no chance of getting the remaining nine in the air any time soon.
“Put frankly, we don’t have the money,” Mzimela says.
Its financial statements for the past two years have still not been finalised, and it is not a going concern.
At least it is no longer facing a liquidity crisis, she says, because the government has just provided it with a new guarantee of R1.74bn.
But it still needs to raise liquidity against that, and it’s not proving easy.
“We’ve been talking to various banks to come to the party to assist us,” she says. So far nothing, however.
“They’re holding us to certain deliverables.”
Basically, they need to be convinced that SA Express has an executive team in place that is competent enough to run an airline before they release a cent.
Given its track record, it is hardly surprising, perhaps, that suitably qualified candidates are not exactly beating a path to Mzimela’s door.
“It’s been very difficult for us to attract anyone.”
How do you persuade people with the kind of qualifications the banks are demanding, and who are in high demand, to join a company that is not even a going concern?
“We are going to have to find people who want to do it for more than just the money, but see it as more of a challenge,” she says.
Unfortunately, even people who love a challenge — and in that respect at least they won’t be disappointed — want to know they’re going to get some kind of salary.
And not long ago, according to reports, the airline didn’t know from one month to the next if it would have enough money for salaries.
Not true, she says. That was due to a “miscommunication”.
“Post the grounding there was a conversation with our staff members to say the airline is stressed, and could be challenged from a financial perspective. We started to throw out various options.”
One of them was that staff agree to be paid 50% of their salary until better days arrived.
“The employees went into an absolute panic,” she says. That “option” was hurriedly taken off the table, “and we have not missed a single salary payment”.
In spite of that, she admits that finding people with the right qualifications (“we’re not going to compromise”) who are motivated more by a challenge than a payslip or performance bonus is going to be hard.
“We are going to be challenged.”
Can high-flyers be convinced that joining a bankrupt airline is a good career move?
Look at the quality of the new board, she says.
“No way would those individuals be on the board if they didn’t have faith in the organisation being turned around.”
She was equally optimistic about her start-up airline, Fly Blue Crane, which ceased operating 18 months ago and is now in business rescue.
“Our capital-raising didn’t go as we had anticipated,” she says.
“Any airline needs scale. You need capital to build scale. With three or four planes it just doesn’t work.”
SA Express only has six planes in the air but has the luxury of taxpayers to bail it out.
What if the government can’t afford any more guarantees after this one?
“It would be silly for SA Express to expect another guarantee,” she says. Nor will it need one. “What’s to stop us being profitable in the future?”
SA Express was generating “very good revenue” before it collapsed, she says.
“The issue was not revenue, it was the high cost base in the system.”
It had twice the number of staff that airlines of comparable size had, she says.
Some, mainly pilots and highly skilled technicians, left when the planes were grounded, but “we are still a little bit surplus to requirements, there’s no doubt about it”, she says.
Employee costs are a “key issue” to be confronted, but the South African Transport Workers Union says containing these won’t happen without a fight.
It says workers haven’t forgotten Mzimela’s previous term as CEO and doubt her competence.
Soon after she left, in 2010, SA Express “started experiencing financial difficulties”, it points out.
“That had nothing to do with me,” she says. “How can I be blamed? Go after the management that was there in place after I left.”
She became CEO of SAA but quit after two years, along with most of the board, when Dudu Myeni became chair.
“There was a misalignment in our understanding of what needed to be done as a board and as management,” she says.
We are going to have to find people who want to do it for more than just the money, but see it as more of a challenge