CASE IN POINT | SAA
by Andrew Ngozo
Supporting the Trade and Tourism Agenda
The South African Airways (SAA) brand is a strong one, not only domestically, regionally but intercontinentally. The airline has a track record for being on time every time; a success it carries with pride as it soars to greater heights into the future, says Monwabisi Kalawe, the Chief Executive Officer of SAA. “I recently had a conversation with a man who has worked for reputable and big airline companies. He described SAA in glowing terms and, to me, this said the SAA brand is associated with all that is positive about the country. We need to leverage and capitalise on this in addition to the impeccable safety record that has become
synonymous with SAA,” shares Kalawe.
According to him, such glowing feedback is a result of a commitment to service excellence that permeates across all echelons of the organisation. “Despite some challenges, which are typical in the business world,
our aircrafts have been on time. This can only be possible if the core of the organisation, its operational employees, are committed to the cause,” Kalawe points out. With such a track record come a lot of opportunities. Kalawe explains that to start with, on the African continent, SAA is privileged to be on a continent that has six of the fastest growing economies in the world. “This offers huge and untold opportunities for the airline!” he states. Secondly, Kalawe says, he joined the business at an opportune time when the airline had just started to take delivery of the narrow-bodied airplanes, the A320s, from Airbus which places SAA in a better position to increase frequency of flights to some countries which have the highest gross domestic product (GDP) outputs in the continent. This is in addition to increasing frequency to already existing destinations.
Seizing Opportunities for Growth
West Africa, according to Kalawe, is a very underserviced region which SAA is investigating to set up an aviation hub. “We have a dual mandate to support the national developmental agenda and to ensure commercial sustainability.” He elaborates this means SAA is well positioned to support the country’s trade and tourism agenda as the airline already has the infrastructure and the reach to these countries and partnerships with South African Tourism where Kalawe is a non-executive director of the board. To optimise costs, SAA and South African Tourism share offices in some locations and also, in collaboration, identify growth opportunities. Kalawe is determined to build on the cost saving initiatives that the airline has adopted successfully in the past two financial years. In the 2012-2013 financial year alone, these amounted to R1-billion. He reveals that SAA recently brought on board cost benchmarking experts from the United Kingdom: “We are looking at every line item on our balance sheet and are benchmarking these against our peer groups in the rest of the world. The benchmarking exercise will assist us with identifying line items that push our operating costs high, especially where such items are not in line with the international trend by peer airlines.” With regards to opportunities in the procurement space, Kalawe sees more opportunities in cost savings and driving transformation. For example, he will be shortly embarking on negotiations with suppliers where the airline spends between 70% and 80% of its costs. He intends to negotiate better prices with them in the interest of SAA. “A turnaround programme demands that we embark on this as soon as possible. We will reduce costs, improve productivity while simultaneously ensuring that we do not cut costs on those areas that will compromise our safety,” he clarifies.
Investing Time in Stakeholder Relationships
Looking to the near future, Kalawe reveals that all the wheels are in motion to create an integrated South African aviation group which will include the likes of Mango Airlines, South African Express and others in order to manage costs. All this is part of the SAA growth strategy and, Kalawe says, this means that the Department of Public Enterprises as the shareholder will harvest off the synergies that result from the integrated aviation group. This will be a medium to long term process which will necessitate the amendment of the South African Airways Act in order to accommodate the new structure he explains. Kalawe clarifies that this new-set up will not mean that one brand falls away in favour of the other as these brands service different market segments. With global trends indicating that passengers are increasingly in favour of low cost carriers, Kalawe anticipates that brands such as Mango, which is predominantly servicing domestic routes, will be quite a big hit in the market. “With the current economic pressures, customers are looking for the cheapest or most affordable option.” Being at the helm of an organisation that has had its fair share of challenges, Kalawe is unfazed about its history and is optimistic about the future and his tenure at the helm of one of the world’s most reputable
airlines. How will he navigate his way through this tricky balancing act? “I am very cognisant of the importance of investing time in strengthening the relationship between SAA and the shareholder (The Department of Public Enterprises) as well as National Treasury, the Department of International Relations and Cooperation [DIRCO] and the Departments of Transport and Home Affairs. Having spent time in personally investing in this relationship, I believe that the organisation is beginning to reap the benefits of this investment. There is a good level of trust because I am very open and transparent about what happens in the company and about what it is that we want to do in the short and long-term. “I allow the government departments to express views to meaningfully influence what we all need to
do going forward. In short, I have learnt a lot from my predecessors particularly about the value of investing in these relationships and maintaining them. I can confidently say that we are working together to reach the point where we realise profits for the shareholder and meet all our targets in terms of the shareholder compact,” Kalawe concludes.