SAA could fly if interference ends, says Nico Bezuidenhout
Former CEO says airline could fly if interference ends
● Nico Bezuidenhout, airline turnaround specialist and outgoing CEO of SAA’s lowcost carrier Mango, says he believes a restructured SAA could be successful if there was no political interference.
“Provided the political will is there to allow it to be run in a professional manner on commercial terms [and] it is cost-effective and appropriately capitalised.”
Bezuidenhout started Mango in 2006 and ran it profitably for eight of its first 10 years. It lost its edge while he was acting CEO of a badly ailing SAA, which he was brought in to fix in 2014.
He left after politically connected SAA chair Dudu Myeni ordered him to withdraw from an expanded code-share deal he’d spent months putting together with Emirates hours before he was due to sign it in Paris. It would have added R2bn to SAA’s revenue.
“When a carrier like SAA gets the opportunity to strike a strategic deal with the biggest and best international carrier in the world, that is not something that you don’t pursue,” he says.
SAA, which had announced that Bezuidenhout’s contribution to “returning SAA to relative stability” was “critical”, terminated his role as acting CEO and he went back to Mango.
He restored it to profitability before being hired to turn around struggling Londonbased pan-African low-cost carrier Fastjet after the previous CEO, who said he had “vastly” underestimated the difficulties of doing business in Africa, was dumped.
After three years at Fastjet, in which time he reduced its losses by 85%, he returned to Mango, whose performance had again dropped off in his absence, in October 2019.
He announced last month that he was leaving to become CEO of Guernsey national carrier Aurigny, which provides airline services to the Channel Islands and in the UK, France and other European countries.
He says although he’d have to weigh it with the quality-of-life considerations that made him take the Guernsey offer, “from a purely professional standpoint” he’d be open to the job of CEO of a new SAA on condition there’d be no government interference.
“You’d want a situation where shareholders manage via a board of directors and allow the company to pursue a strategic direction without any interference.”
He says there’s “always a risk” that a revived SAA would continue to be a drain on the fiscus.
“As a shareholder by being a taxpayer, if it generates losses as a function of circumstance such as the pandemic, I can tolerate that. If it suffers losses because of inefficiency, that is where you need to draw the line.
“What we as South Africans should demand from our state-owned airline is an efficient business. That is the key requirement.” He says it would not be fair on taxpayers or competitors for the government to continue investing in a business that is not efficient.
While the potential economic benefits of a national airline are clear, it is not necessary for the state to own it in order to generate those benefits, he says.
He believes there’s no need for a new SAA in the domestic space. “From a domestic operations standpoint, passengers don’t suffer for choice. There are effective and efficient operators. When you look at connecting SA to its African trade partners this is less true. In some cases your only option is an SAA.”
He believes discussion around a new SAA needs to be “less political and more hardnosed economics”. He says given its track record it’s hard to say if SAA will ever be free of government interference, “but recent statements suggest it is less preoccupied with the necessity for state control”.
“Government seems to be saying it doesn’t have to directly manage and run SAA, it could be done by alternative shareholders with government having a reduced stake.” This would considerably improve the new SAA’s chances, he says.
“Airlines have to be nimble. They’re subject to the whims of consumers, to economic cycles. You need to make decisions ongoingly every single day and make sure those decisions take effect very quickly.
“You can’t run an airline like a government department because by the time a decision is made, the market has changed.”
Bezuidenhout, who at 44 has a solid reputation in the aviation industry as a turnaround specialist, says running a successful airline is not rocket science.
“If you reduce your cost structure, eliminate loss-making routes, address the capital structure, translate a plan into real, tangible actions, then most businesses will start showing some improvement. If you do that consistently and long enough then you do get a business to be successful.”
Ethiopian Airlines has been successful because they’ve got a co-ordinated, “wholeof-state” approach to aviation. “You don’t have one department working against another department, or one policy working counter to the intent of another policy.”
Secondly, the CEO has been in the job for at least 10 years with one concrete strategy.
“The shareholder [the government] and management are fully aligned to this strategy, and they’ve got consistency in terms of implementing that strategy.”
The CEO at Emirates, another outstanding aviation success story, has held the position for close to 30 years.
“Their policies and processes have been consistently aligned to a vision shared by management, board and shareholder, and have been implemented over time.”
Mango’s competitors are furious that the SAA business rescue plan includes a R1bn bailout for its low-cost subsidiary, which has not been placed in business rescue.
Bezuidenhout says that as its biggest code-share partner domestically, Mango’s business was “disrupted substantially” even before Covid-19 by an eight-day SAA strike a month after he returned to Mango, and then when SAA went into business rescue in December.
“The shareholder of those businesses must decide, do they provide funding or don’t they? That decision needs to be made on the basis of the value of the asset they’re investing in.”
He says Mango has a proven history of success. It has carried 30-million passengers, generated more than R22bn in economic activity in SA and never needed a bailout before.
“You can’t just say that because an entity is state-owned it doesn’t deserve consideration in terms of capitalisation.”
He believes the post-Covid domestic aviation space offers good opportunities, “but you can’t reset to a plan you had in January, you need to reset to a plan that takes full cognisance of the Covid war. This is one opportunity for a reset and it needs to be taken.”
You can’t run an airline like a government department Nico Bezuidenhout Outgoing CEO of Mango