BEE team blamed for 1Time demise

HE founders of low-cost carrier 1Time, which went bust in November last year, have put the blame squarely at the door of the BEE consortium which bought a 25% stake in the company in March 2011.

Backed by funding from the Industrial Development Corporation (IDC) they took control of the board and, with no experience in aviation at all, proceeded to run the airline into the ground.

“We lost management control,” says former CEO Rodney James, 52.

But 1Time’s corpse is hardly cold, and James and his fellow 1Time founders, Glenn Orsmond and Michael Kaminsky, are about to launch another low-cost carrier called Skywise.

They ’ ve announced it will be flying the Johannesburg-Cape Town route by the third quarter of this year.

Alarm bells rang when Orsmond, who was then CEO of 1Time Holdings, abruptly left the company in September 2011 and was replaced by the BEE consortium leader Blacky Komani.

At the time, Orsmond brushed aside concerns about Komani’s lack of experience, assuring shareholders and customers that they had nothing to worry about because James would stay on as CEO of the airline.

But six months later James also quit, along with group IT director Kaminsky.

The perception was that they saw the writing on the wall and left an untried and untested team in charge of a doomed airline.

Nothing could be further from the truth, says James.

He claims they lost management control to a bunch of novices.

“We were outnumbered on the board so it was not difficult for us to be outvoted on the board,” he says.

1Time could have been saved, he insists, in spite of formidable external challenges such as rocketing airport taxes and levies imposed by the Civil Aviation Authority, a weakening rand, rising fuel costs and a government-owned competitor who was being heavily subsidised by taxpayers.

But “the BEE guys” with no experience made “crazy” decisions that were “suicidal ”, he says.

Their biggest blunder was cutting operations by 30%, thus killing cash flow, but maintaining their overheads.

“Our strategies and vision to move forward were completely different to the BEE guys and the rest of the board. None of our proposals went through. That’s why we all left. We couldn’t agree on anything, from the strategic things to operations. And they had zero experience. ”

But why sell a 25% stake to people with zero experience then?

Because, thanks to the IDC, they had the money. More importantly, says James, there was an understanding that, as part of the BEE deal, the IDC would fund new, more fuel-efficient Boeing 737-300s to replace 1Time’s ageing and increasingly uneconomical fleet of gas-guzzling McDonnell Douglas MD-80s.

“The idea was that the BEE guys would come along with funding that would help us with this. When we brought them in, the intention was to use the IDC for the fleet change as well.”

But after they signed the deal, the picture changed.

“The IDC’s brief changed,” says James. “I don’t know where the change came from, but suddenly their internal policies did not allow them to fund an aircraft fleet.”

Secondly, the founders and executives of 1Time didn’t think their new partners would snatch management control out of their hands quite so soon.

“We brought them into management, thinking they would come in and learn. We were quite happy for them to take over management one day in the future, once they’d learnt how. But they came in and I guess felt they didn’t need to learn, and that they could run the airline.”

Shortly after the BEE consortium took control Orsmond presented proposals for a new executive team and structure which the new board rejected.

So Orsmond packed up and left, feeding the press some disingenuous waffle about needing to reconnect with himself on the beaches of Cape Town.

In the following six months, the new controlling shareholders “purged” the rest of the executive team, says James.

He himself, the incumbent CEO, was unceremoniously let go in March 2012.

“I thought it was quite arrogant. I was having discussions with them and the next day I was gone. And they were extremely happy to see the back of me.”

However, the men said nothing about being shafted at the time, going along with the official line that they’d been meaning to leave anyway and implying they had confidence in 1Time’s future under the new leadership.

James talks now about corporate governance, but one wonders if shareholders who lost a lot of money because of what happened at 1Time might have a right to feel aggrieved? “Certainly, ” he says. Aggrieved about the way they were left in the lurch by the people whose expertise and control of the company was what they believed they were investing in?

“Well, it’s easy with hindsight to make comments like that,” he argues. “I was a substantial shareholder as well and I lost a lot of money.”

Wasn ’ t it at least reckless to allow Komani to take over the company as group CEO with “zero” experience?

“I didn’t allow him to take over. There was a board there that was outvoting us and we lost control and had to leave. Were we supposed to hang around there like puppets? It doesn’t work like that. If the guys don’t want you, you must go.”

Komani himself was completely and, from a shareholder’s point of view, disingenuously unfazed about his lack of experience.

“One of my skills is to make use of the great guys around me,” he boasted, before getting rid of them.

A forensic report commissioned by the trade union Solidarity shortly before 1Time collapsed blamed failures by both the old and new management and said neither had a clue about running a budget airline.

This obviously is a rather worrying claim, considering James and his friends are about to launch Skywise to the public.

But James, who says he hasn’t read the report, says this is nonsensical.

“For six of the seven years [that we] were in control of 1Time, we made profits. 1Time was the fastest growing airline in the country for those seven years.”

Ironically, 2008, the year in which oil prices tripled, turned into a year of “massive growth” for them, because there was a “massive shift” of corporates from premium class to low cost.

When the oil price went down again, 1Time held on to this lucrative segment and did many corporate deals after that.

But analysts believe that James and his co-executives blundered fatally by investing millions in a merger with aircraft maintenance company Safair Technical to form Jetworx — rather than in a more fuel-efficient fleet.

“Hindsight is a great science,” says James, denying that the lossmaking Jetworx helped bring 1Time down. By November 2011 it was breaking even, he says.

Although the demise of 1Time has left two million passengers looking for an alternative, he says the Skywise team are sorry 1Time won ’ t be around to compete with.

“We were hoping to show them how to run an airline,” he says.