FIFI PETERS: Today, South African Airways (SAA) opened its ticket system to prepare for its take-off again next month. SAA will start flying again on September 23 after 15 months of being grounded due to the lockdown and the business-rescue process.
We have the SAA interim CEO, Thomas Kgokolo, on the line with us. Thomas, thanks so much for giving us your time. I’m just wondering if you’ve been keeping track of sales today as you reopened to the market again.
THOMAS KGOKOLO: Good evening, ma’am, and good evening to your listeners and the customers of SAA. I’ve just been in board meetings, and there are a lot of things that we still need to put together. So I’ve not really had an opportunity to track the sales, but possibly I’ll be doing that towards the end of this week.
FIFI PETERS: I just thought out of interest as everyone has heard the news and is digesting the news that SAA is back. But you are coming back at a very difficult time for the economy, as you’ve just said. The fight against the pandemic is still going on. You even possibly have a higher cost base if you look at what the current oil price is doing. So what is the short-term outlook for the business?
THOMAS KGOKOLO: Thank you for the question. I agree with you that we are coming back at a difficult time. That’s why you will see that we’ve put in a forward process in terms of the road that we’d like to use going forward. Domestically you will see that we are doing Cape Town and Johannesburg.
We have looked at data and we’ve looked at demand in the market, and we are comfortable that at this stage Cape Town is the best out of all the routes that we see in South Africa. Hence you’ll see that we’re not doing Durban and other cities within the country.
What we then did, we went into the region as well and considered things like the Covid vaccination rate in some of these countries. We also looked at the load factors during Covid during lockdowns to date. And that’s why you’ll see that we want to explore markets such as Maputo and Harare, because we have seen numbers that are not bad as well.
More importantly, we’ve looked at the competition landscape and we found that in the region there are not a lot of players, of course, because of the challenges the market there poses; and we’ve got a better chance of competing in that particular space as well. So we’re quite comfortable that these particular routes gives us an opportunity to re-enter the market with optimism, but also be very cautious because the situation is quite volatile and extremely uncertain.
FIFI PETERS: It’s quite interesting that Nigeria is not on your immediate list of go-to places. When you talk about competition, it looks like quite a number of players are interested in the opportunity on the continent, Thomas. Qatar is expanding its presence here, as is Emirates, although I do understand you have a code share with them. How are you essentially planning to stand out in terms of competition?
THOMAS KGOKOLO: Actually I was surprised, when the team model did the route that we are going to start with, that Nigeria didn’t make it. I think it is with regard to lockdown restrictions and the demand capacity there, and not really featuring on our top five routes that we selected.
In terms of our approach into the market it is as follows: we are going to put pricing in the market that is very clear and simple to understand. What we’ll also do as well is we are going to improve on customer service to ensure that the level of excellence that we have been known to be delivering – we’ll excel better on that.
Thirdly…we want to do more consolidation and collaboration, so the likes of Emirates that we have a code share with, we want to continue those particular partnerships. As you can imagine in these kinds of uncertain times, sometimes it’s better to collaborate. So we are looking at collaborating as well.
What we’ll also do from a Voyager offering point of view, we’ve got some exciting offerings there as well, so that those loyal members of ours that have been part of the Voyager programme can get some benefits out of that as well.
But in the longer term … we will reconfigure our fleet and make sure that it can match the value proposition that we’ll be bringing to the market. At this stage that is basically how we are going to compete in the market and we will improve as the market opens up.
FIFI PETERS: Are you coming back as a profitable airline, or how long is the road to profitability in your forecasts?
THOMAS KGOKOLO: Of course I think one of the challenges is that we are out of the business-rescue process, we are in care and maintenance, and during care and maintenance we incurred some costs. So we are already on the back foot in terms of profitability. But what we did, we’ve made sure that the routes that we select at least during these abnormal times cover their own operational cost so they don’t bring losses into the balance sheet.
So we’re quite comfortable that if the market plays out the way it’s playing out now, we’ll actually have routes that allow us to be active, while making sure that our contribution margins are not eroded by that.
But I think for us to start predicting when we’ll be profitable, we have to say that the market needs to open up into targeting where international travel is now functional. And we hope that in the next 12 months we can see that, as nations start vaccinating, and that we will then start being able to model that much more informed profitability figures than from where we are now.
FIFI PETERS: So will you need assistance from your major shareholder, presently being the government? Or is the current deal on the table that you’re deliberating over with your new equity partner something that will prevent a possible bailout by the taxpayer for SAA?
THOMAS KGOKOLO: Our expectation is that the business went out of business rescue with the intention to restart it. And with that intention to restart the goal was that going forward, a strategic equity partner will come in, bring resources such as finance and also technical competency. The government has made it clear that there won’t be money going forward to recapitalise SAA. So our understanding is that, yes, indeed the strategic equity partner will then come on board and assist us with making sure that the airline is sustainable going forward.
FIFI PETERS: And where is that process with Takatso?
THOMAS KGOKOLO: A good question. They actually issued a statement today to indicate that they’re now at the stage where they are looking at the [SAA] sale purchase agreement. So on our side we’ve really done well in supporting the due diligence, and now I think it’s just a matter of them looking at the sale purchase agreement and of course the DPE (Department of Public Enterprises) valuing/vetting this process and they’ll be responsible for issuing communication on further development in that regard.
FIFI PETERS: And any idea of how long that might all take?
THOMAS KGOKOLO: I don’t have an idea, but all I know is that some of these things can be complex and we have to be patient. We have done a lot of work so far, and I think it’s just a couple of yards to cover.
FIFI PETERS: And what can you tell us about Mango and its business-rescue process, and how your relationship with the workers there is, given that they took you to court?
THOMAS KGOKOLO: Of course it’s been a very difficult relationship with the workers and you can appreciate the frustration from the workers for not being paid. But I think we have covered some ground in terms of having the BRP (business rescue practitioner) being on board. And the BRP has really bridged that gap by consulting with the workers, consulting with the creditors and basically the companies under the care of BRP. And then he will communicate in terms of the way forward around salaries, around creditors and also around the business plan going forward of Mango.
FIFI PETERS: Just on the issue of payment of your workers, who has been paid and who hasn’t been paid? Or perhaps more specifically put, have the pilots of SAA and Mango both been paid, or has that not been the case?
THOMAS KGOKOLO: We must be very careful when we look at these two entities. They are two separate entities with two separate governance processes. SAA has been paying their employees, and on the side of Mango, because it’s a separate entity that is funded differently, of course, what we found is that Mango started having cash problems, and for those particular months have been in the place that employees have not been paid. So we must treat them separately from a governance perspective, of course.
FIFI PETERS: Okay. Thomas, thanks so much for your time, sir. That was Thomas Kgokolo, the interim CEO at SAA.