eTN interviews South African Airways Acting CEO Nico Bezuidenhout

During the International Air Transport Association (IATA) Annual General Meeting (AGM) recently held in Miami, Florida, eTurboNews (eTN) Publisher Juergen T. Steinmetz had the chance to meet with and interview Nico Bezuidenhout, Acting CEO of South African Airways (SAA). The meeting started out with Nico sharing with eTN about SAA’s new service from Washington, DC, to Accra, Ghana, on to Johannesburg, South Africa. This route not only connects the United States with Ghana and the rest of West Africa, but it is giving new opportunities to trade, commerce, and tourism through traffic from South Africa to Ghana, and, of course, for Americans looking to find their roots on a tourism trail to West Africa.

eTN: Can you share with our readers how South African Airways plans to expand its routes?

Nico: Our new focus on South African Airways is to connect Africa. As a member of Star Alliance, we have been able to move forward with this aim by tapping into the largest airline network in the world. We are determined to bring our premium service to more and more destinations in Africa.

Our goal is to increase our revenue in the region by 30% in the next twelve months. Africa is a huge potential market for aviation, and as Africa’s legacy airline, we want to see the continent contribute to more than the current 3% of global aviation.

eTN: What new routes can travelers look forward to in the near future by SAA?

Nico: SAA is already strengthening its position in West Africa with the launch of a new service between Accra, Ghana, and Washington, DC, in the United States. Starting August 3, 2015, SAA will be providing the only nonstop flight between Ghana and Washington, DC, as well as the only Skytrax 4-star-rated airline service with world-class quality from the entire West Africa region to North America.

True to our promise to improve inter-connectivity on the continent, SAA has entered into a bi-lateral codeshare agreement with Africa World Airlines. This airline partnership will offer SAA customers from Washington and Johannesburg seamless connectivity via Accra to other destinations in Ghana such as Kumasi, Takoradi, and Tamale as well as to Lagos, Nigeria.

eTN: Besides new routes, what other goals is South African Airways working on?

Nico: We are working very hard on improving our performance ever since we completed our 90-Day Action Plan. To date, we have seen a material year-on-year improvement noticeable in the current financial year, which for SAA commenced in April 2015. The plan included major cost-cutting initiatives and network optimization, which led to significant savings. South African Airways is now ready to boost its capacity and focus on its African routes.

In the first quarter of 2015, a lot of effort went into stabilizing our airline, and we achieved significant milestones. We now want to continue to grow our capabilities.

eTN: Right now there is a war of sorts between US airline carriers and Gulf-based airlines. What can you tell us about SAA’s new partnership with Gulf-based carrier Etihad Airways?

Nico: Our partnership with Etihad is extremely important and brings new connectivity to our airline. We are very much committed to Star Alliance, and at the same time we welcome this partnership with Etihad. As the South African National Flag Carrier, SAA has a specific and important role to play as an enabler for tourism and a driver of economic growth through trade. The movement of people and goods by air is more important than ever before, and our partnerships and efforts in meeting aims of our 90-Day Action Plan support economic growth and tourism in our region.

Tourism has always been and remains an important catalyst for growth in South Africa. It supports one in every 12 jobs in South Africa either directly or indirectly.

eTN: What other areas are the different arms of the SAA Group involved in?

Nico: The SAA Group supports tourism through an integrated offering. SAA is a Skytrax four-star-rated domestic, continental, and inter-continental airline, and Mango, our Group’s Low Cost Carrier (LCC) is one of the most successful LCCs on the continent, profitably serving primarily domestic routes and Zanzibar. Voyager, Africa’s leading airline loyalty program, SAA Cargo, Air Chefs -our catering arm, and South African Airways Technical, the leading FAA-accredited maintenance facility in Africa, are all doing their parts to boost the economy.

The tourism numbers are staggering. An Oxford Economics study estimates that approximately 615,000 people are directly employed by the tourism industry while a further 451,000 jobs are indirectly linked to the sector and 312,000 people are directly supported through the household spend of tourism workers.

It is no surprise then that tourism is one of the six key drivers of the South Africa 2011 National Growth Path Framework. It is a key sector for growth, and from a tourism baseline of R 189.4 billion in 2009, the contribution of tourism to South African GDP is expected to exceed R 500 billion over the next decade.

eTN: Will you share with us more about SAA’s 90-Day Action Plan?

Nico: The tourism numbers sound appealing, and forecasts are rosy and bullish. So while the merits of forums such as Indaba are undeniable, it is clear that a general responsibility for positive growth falls on the airline Industry. It is for this reason, that the Board of SAA late last year approved the 90-Day Action Plan. It was not a quick fix plan, but rather, an instrument to return the business to a stable point for full implementation of a Long-Term Turnaround Strategy.

In March this year, SAA successfully completed the plan and the company has achieved significant milestones during that time. Loss-making routes such as Mumbai and Beijing were culled, but as important sources of tourism, SAA expanded its code reach in these source markets, now providing more than 10 points in India alone through codeshare operations. SAA’s new service into the United Arab Emirates delivers a presence in one of the busiest air hubs in the world with forecasts indicating that beyond the stemming of losses in our business, the actual potential for growth in tourism through this move is exceptional.

Going forward the focus is less in culling routes and more in growing from a stable base and platform. SAA plans to grow capability to better connect South Africa with its key trade and tourism partners. By achieving business stability and continually being mindful of managing costs, a strong foundation is set to gear for growth in a measured way.

eTN: What are SAA’s top five priorities over the coming 6 months?

Nico: We plan to implement our route network and fleet plan, as already accelerated through the 90-Day Action Plan. Over time, an airline stands the risk of inadvertently injecting inefficiencies into its network plan. Following an extensive study of the current plan, SAA has found that there is a wide range of improvement opportunities identified, with a projected positive impact of R 2.5 billion in annualized earnings. This will significantly curb losses and position the airline for future growth.
SAA will also continue to focus on partnerships. No airline is able to service every route with its own aircraft and, through effective partnerships and code-sharing, SAA’s reach will continue to grow, as was the case with our expanded Middle Eastern operations which added 26 additional destinations and source markets to the SAA network.

Our next area of focus will be revenue gain. This includes addressing several commercial areas, including much tighter revenue management as well as developing a new distribution strategy where SAA closely embraces and leverages travel agency and TMC partners. To optimally cast SAA’s revenue net and claw back past inefficiencies, a cohesive approach is required which will see SAA’s internal efforts supported by aligned marketing and communication activities, using powerful owned channels such as Voyager, to effectively communicate its value proposition.

A key focus area will also be cost compression, whereby our business will continue to seek optimized efficiencies throughout every aspect of the company. Ongoing savings initiatives will be implemented without compromising the quality and reliability of our product, and in this regard, in excess of R2bn in initiatives have been quantified, ranging from labor cost management through to supply-chain re-engineering. Growing the revenue line while simultaneously managing to keep costs down, not through a program but through instilling a particular cost-conscious culture, is the quickest and most sustainable way of ensuring sustainable bottom-line results.

SAA will also continue to strengthen its governance, risk management, and optimization of the group structure, representing our next area of emphasis, where matters to be addressed include how our group companies inter-relate to each other, how is each one is set up to best service its chosen markets, and whether or not we have a best-practice control environment that pro-actively manages the inherent risk present within an aviation group.

Finally, clear drive towards performance excellence has been taken on by SAA, notably within the human capital arena, completing the near-term area of our focus. Beyond the performance excellence envisaged for the SAA business as a whole, this translates into individual accountability.

eTN: It sounds like SAA is focused and working hard on achieving many goals to benefit the airline as well as tourism as a whole. Thank you for taking the time to talk with us today.

Nico: Thank you for the opportunity to share with your readers what SAA has been doing, what we have been able to achieve so far, and where we are looking to go in the future.