Restructuring at SAA - loss of key staff

[starcrest]

SAA - : A Modern Parable

A Japanese company (Toyota) and a South African company (South African
Airways) decided to have a canoe race on the Vaal River...............Humiliated, SAA management laid off the rower for poor performance,
halted development of a new canoe, sold the paddles and cancelled all
capital investments for new equipment. The money saved was distributed
to executives as bonuses and the team outsourced to India.

Fantastic post Asianeagle, one of the best I have seen.

Even though it is a universal example, your post refelects SAA reality to the tee (hee hee).

[Al Kida]

sure does

[Lex44]

Really...? I smell cynicism.
What I didnt like about SAA is their luggage handling on more than one occasion. Talk of luggage dismembered. Do they break this at will or is the rower sabotaging the boat. Somebody's going to drown. Hear the management have life jackets. Huh!

[Frogman1484]

yes but they do have a good website...got best website to Africa award...wow!!!

[FUG]

Sunday Times - 10 June

SAA executives set to take flight
Simpiwe Piliso Published:Jun 10, 2007

--------------------------------------------------------------------------


South African Airways is bracing itself for a spate of high- level executive resignations in the next few weeks.

Business Times has established that at least four of the airline’s 11 executive members have indicated that they intend to submit their resignations next week.

Some members of the executive team raised concerns about SAA’s cost-cutting plan at an executive committee meeting on Wednesday.

During the meeting, they collectively indicated their intention to resign.

But on Thursday and Friday, SAA chief executive Khaya Ngqula approached the executives individually to discuss their grievances and persuade them to stay on.

It was reported this week that the company’s chief financial officer, Gareth Griffiths; chief risk officer Vishnu Naicker; general manager tasked with restructuring, Nomfanelo Magwentshu; and legal counsel Louisa Zondo, had all told Ngqula of their plans to leave.

The four executives could not be reached for comment on Friday on whether they were negotiating to leave the company.

Analysts this week said the departure of these executives would hamper the progress of the cash-strapped national carrier’s plans to introduce cost- cutting measures to save R2.7- billion in the next 18 months.

SAA spokesman Robyn Chalmers declined to comment.

“Nevertheless, restructuring is unsettling for many staff members and companies tend to lose some of their best people. SAA is looking into ways to retain people across the board as part of a strategy of ensuring we don’t lose those we need for operations,” Chalmers said.

The airline has lost a total of six executives since Ngqula took the helm more than two years ago.

Analysts have warned that the latest “unsettlement” and other continuing concerns at the airline could result in Public Enterprises Minister Alec Erwin demanding Ngqula’s resignation.

Chalmers confirmed that three lower-based managers — insurance head Pravin Nair, compliance head Andy Mothibi, and business risk head Reg Haman — had resigned in the past two months.

SAA also warned last month that up to 1000 retrenchments would be unavoidable — and about 180 of SAA’s 600 managers would be retrenched.

Negotiations with the unions are scheduled to start this month.

[cavortingcheetah]

A little off topic perhaps but today's Flight International carries this story on page18. No doubt there will be losses among key staff such as senior pilots?

SAA is to ground its 747-400 fleet, revamp longhaul and split into seven units as a part of a wide restructuring plan that aims to restore profitability within eighteen months.
The airline has six remaining 747-400s, five leased, one owned.
CEO Khaya Ngqula said:

'In the face of a high cost base created by uncompetitive ownership, aircraft lease costs, excessive headcount and fuel price volatility, SAA must overhaul its entire business if it wants to survive.'

Is it overly cynical to wonder aloud if there is an ulterior motive afoot here? A plan to sweep away some of those pilots who have been in SAA the longest in order to replace them from the bottom with others whose appointments might have, how shall one say, a tad of the political about them?

[ByAirMail]

This is interesting to watch. Amazing to notice how absent the staunch S.A.A. flag waving Fluffy fan and Jetnut (amongst others) are. Must be very busy updating those C.V’s.

Found it very interesting that S.A.A. is cancelling their Paris flight’s 2 month’s before the Rugby World Cup, while Air France is laying on extra flights. Guess that summarize the management potential.

[JetNut]

ByAirmail...

Shame. You really do have a serious chip on your shoulder after that dreadful interview in 1999.

Remember, your fellow aviators are not the enemy here. (Maybe that's why you didn't get the job in the first place, try to get over your paranoia mate, nobody is conspiring against you)...

But, if SAA closes down I'll be gunning for your job

[4HolerPoler]

Cool it JetNut - the guy's got a point - what kind of airline closes down a route to a destination where a World Cup event is being played right before the event?

The word palooka's springs to mind.

4HP

[Frogman1484]

You will be surprised on what a little impact the Paris flights during the world cup has on the bottom line.
The same goes for the soccer world cup. On the big picture it will be a short lived increase in loads at reduced yields that will not have a long lasting impact on the aviation scene. Look at Sydney after the Olympics, Seoul after the world cup etc etc.

[ByAirMail]

Dreadful interview in 1999….now we would never know if it was dreadful will we Jetnug. Because your organization did not even have the common decency to advice people after their interviews of their status.. but maybe it was dreadful because I wore Garfield socks, and no jacket as it was 30 deg. outside.
I have never attacked my fellow aviators, ( exept for you and fluffyfan, after you had a go at us "non-S.A.A. infidels" ) unlike you on numerous previous threads.
I would love to have you in our organization, it will give you a really good insight in how an airline should operate, but unfortunately judging by the personality you have displayed on numerous pprune threads you would not make it past the first interviews.
Talking about chip on the shoulder ( a phrase you have used often before ) You must be pretty well balanced, seeing that you have a chip on each shoulder.

[fluffyfan]

ByAirMail just a quick response

The Paris route is operating until after the world cup, only then will it be closed down, because they cannot make a profit on that route due to low passenger numbers.

I thought that would make all you SAA bashers happy, SAA making a decision about profit.........imagine. Now although it does not make me happy to see SAA shrinking I do think that the only way forward for SAA it to restructure and wean itself off government funding, I think you may find we have similar views, so the short term pain at the present moment will hopefully be rewarded buy long term gain, but who knows, it depends on if the government is going to interfere or not.

As for the personal attack, not sure how I have offended you, I cant remember putting down the "Non -SAA infidels" but I am sure you will do a history search and find something said somewere, just bear in mind that whenever SAA is mentioned on this forum the crazies (much like yourself) come out the woodwork and start attacking, so excuse me if I happen to have defended my position a few times. As for CV's........no thanks I am quite happy where I am.

[ByAirMail]

At least it is comforting to see we are starting to agree on some things Fluffyfan. Restructure and profitability at S.A.A. is the only way to go, not only for the survival of S.A.A. , but also the good of aviation in S.A. So we are not the crazy’s, maybe more like the "keep them honest brigade" as this is what we have been calling for all along.....the weaning from government.
Good to hear the Paris flights are continuing till later, as the Sunday papers mention ending at the end of the month, I will take your word over a reporter any day. These flights, apart from a very small spike in profit as Frogman mention, if well managed, can do a lot for goodwill from the public, something that is needed as badly as cost management.

[Beta Light]

If Air France can increase their flight's, why not fill a S.A.A. flight (SA Rugby magazine, April 2007 page 121 - JNB to Paris 14 flights per week from April ) (www.airfrance.co.za )
Keep the current slot's... once you lose them it is hard to get them back. There is still time to turn this route around as the demand is obviously there.

P.S. As I am looking at the cheapest way to go to the world cup I buy all the relevant magazines and have not seen a S.A.A. ad as yet. Advertising will be the wrong place to cut cost.

[JetNut]

ByAirmail.

SAA pilots are just passengers in this one. Trust me , if we ran this airline you'd have nothing to whinge about, so in a way our management's incompetence is your gain, it gives you something to bitch about in the pub, otherwise methinks you wouldn't have a life.

Since its your hard earned tax money (are you paying tax?) paying our salaries (which we obviously don't deserve in your opinion), its probably fair for you to be highly opinionated about an organisation you've never worked in. I don't go around bashing pilots flying for Cathay, because I have no clue what their conditions of employment are, so maybe you can borrow one of my chips and learn something.

However, once again it is people of your callibre/personality trait/reasoning/attitude that makes being a pilot embarrassing, this sour-grape syndrome of yours is getting kinda stale.

PS. 4 holer poler - this is not a personal attack on Byairmail, but merely a humble opinion on a public forum. Also note, my friend wanted my opinion by asking for me in a previous post, even though I decided not to make any comments for awhile as this forum was becoming very depressing, especially when there's more important things to worry about, like the murder of innocent children in Iraq, instead of wasting energy on narrow minded individuals with a warped sense of reality living in luxury apartments.

[Capetonian]

On a wing and a plan

Jocelyn Newmarch



12 June 2007 11:59

South African Airways’ profitability and market share have declined at a time when air passenger numbers have more than doubled. This brings more urgency to SAA’s restructuring plans, amid concerns that the transformation of an ailing airline will not go far enough.

On Monday SAA unveiled its plan to achieve a R2,7-billion turnaround aimed at restoring the airline to profitability within 18 months. Public Enterprises Minister Alec Erwin warned that further state support depended on the plan’s successful implementation. SAA will ground six Boeing 747-400 planes, five of which it is leasing, close its Zurich and Paris routes, cut 30% of its management staff and “renegotiate working conditions”. The airline was coy about retrenchments, emphasising that it had not yet opened negotiations with staff unions. It will reshape its business into seven separate subsidiaries and will sell off its catering unit and travel industry platform Galileo.

It is no secret that the struggling enterprise has required a series of government bail-outs. In March this year alone, government injected another R1,3-billion of capital alone. But the sheer scale of SAA’s underperformance becomes clear only when examining the extraordinary growth of the South African market.

Last year 15,8-million people flew in South Africa, from 7,5-million in 1999. These figures, provided by economist Mike Schussler, include international, regional and domestic flights and show that the market has more than doubled.

Statistics from OR Tambo International Airport tell a similar story. In 1992 the airport saw fewer than three million arrivals. By the end of the 2006 financial year this had grown to 7,97-million. This growth was initiated by the launch of kulula.com and 1Time, both private-sector airlines.

But, at the same time, SAA’s market share has declined to 39% from almost 100% previously and the airline has struggled to make a profit, according to Schussler. “If it’s been this unsuccessful in a growing market, one dares not think what SAA would look like if interest rates went up,” he said.

During the unveiling of its restructuring plan, it emerged that SAA’s African routes are the most profitable part of its business, adding R500-million to the airline’s bottom line last year.

“SAA is traditionally strong on routes where it does not have much competition, such as on the African routes, and that can be put down to the management structure,” Schussler said.

At present SAA is Africa’s largest airline, but there are concerns that it would not be able to compete if African countries liberalised their aviation policies. SAA CE Khaya Ngqula identified delays in African liberalisation and an open-skies policy -- where airlines are free to choose how many flights are needed -- among the threats facing the airline.

Schussler believes the airline is overpriced in relation to its competitors and that cheaper flights bring in tourists with more money to spend in South Africa. At present much of SAA’s competition is domestic and provides jobs for South Africans, but must compete against an unfairly subsidised business. The lease agreement between SAA and Mango has not been made public, raising the question of whether the new subsidiary’s losses are being hidden in its parent’s balance sheet, he said.

Rival airline Comair takes a somewhat different view. Its CEO, Erik Venter, estimates SAA’s market share at 50% of total, as its wholly owned subsidiary, Mango, holds 12% of the market. “It’s hard to judge whether it [the restructuring] will make any difference,” he said. “There are more fundamental issues than what they are talking about.”

SAA decided to ground its 747-400s because of high costs, but many airlines, including British Airways and Virgin, successfully use 747s on the Johannesburg to London route, Venter said. International airlines receive a higher proportion of revenue in hard currency, compared with SAA, which makes it harder for the airline to compete globally. “They are pursuing a market share that’s too big for their cost structure,” he said.

If SAA does decide to retrench, it comes at a good time for their workers, said economist Iraj Abedian. With a booming economy, workers would be offered a retrenchment package and would be likely to get a job offer from another company with relative ease. Schussler agreed that retrenchments would release skills back into the economy, but added that the take-up of retrenched employees would depend on the specific skills they could offer.

The airline has a total staff complement of 10 085, including 698 managers. This means that, if the 30% management cut is carried through, at least 200 managers will be sending out CVs.

Venter agreed that retrenchment would not necessarily be a solution. In Comair’s experience, SAA typically pays its staff between 30% and 50% more than anyone else in the industry, underlying the need to look at total remuneration packages rather than retrenchments. “It’s not the number of staff so much as the level of expertise. There’s been massive turnover in top management. There might not be enough expertise left in the airline to take good decisions,” he said.

[Avi8tor]

I have said it more that once, but will say it again.
Get the government out of airlines!!

Remember, your fellow aviators are not the enemy here. (Maybe that's why you didn't get the job in the first place, try to get over your paranoia mate, nobody is conspiring against you)...
But, if SAA closes down I'll be gunning for your job

Just because people have the interest of the WHOLE industry at heart doesn't make them paranoid. I have a feeling that its the group that are protecting their self interest at the price of the rest that are paranoid.

If SAA announced that it was so close its doors. I bet it would take less than 24 hrs before the routes would be taken over. This time profitably. The airline would expand, and there would be MORE jobs for you guys.

[Frogman1484]

I think if SAA should close down , yes the routes would be taken up in 24 , but not by a South African company.

All the spare SAA pilots looking for jobs in SA would tend to drive salaries and conditions down for everyone in the industry...you are all arguing market forces here right!

The age of the average aircraft operated in SA is probably 30 years old if not older, so just on operating costs I cannot see how they will even be profitable.

I think you will all be better off with SAA restructuring and still existing in the african avaition industry.

[Avi8tor]

I have to disagree. The problem is not the demand, we all know the aircraft are full. Its the cost structure.

The routes are protected in South African hand by the bilateral agreement. So NO foreign carrier could own more than 49% of the new airline.

The old vs new aircraft debate runs around capital cost vs fuel/maintainance. Watch what happens when crude oil hits $80 a barrel.

You are right about supply and demand. If SAA went 'tits up' and the routes were restructured in private hands, initially the new operating effiecency's would lead to a few guys being out of work.

The world wide demand would swallow them up in no time. Then as the profit making airline expanded, the shortage of experienced pilots would drive salaries up and create more new jobs than were lost.

A little short term pain for long terms gains.

[Frogman1484]

Aviator I think your underestimating what another 600 qualified pilots will do to an industry in SA. Also not all of the pilots from SAA will want to go to the sand pit or to the Far east, I think that the ones that wanted to go have already left long ago.

I also do not understand on how an extra 600 pilots will put pressure on the operators to increase salaries, if anything , they will come down due to an oversupply. Once they have all jobs maybe we might still be in a pilot shortage scenario, but that will take a long time.

The other thing is that any new operator will have to set up first get all of the certificates in place etc etc which all takes time.

You can take the domestic portion of SAA being divided up by the local players probably with no or a slight increaser in Airframes. The international portion of SAA will very quickly go to the seats of other airlines.

What will a new airline have to get in order to take over SAA's international loads and be able to compete with the likes of BA SQ VR CX etc. Will they have to buy A340-600, maybe a few 400's or a couple of 777's. Well if that is the case. Does it not make more sense to restructure SAA as it already have an AOC route agreements and frames.