Lessons in downing a high-flying airline

31 July 2016 - 02:02 By CHRIS BARRON

Nico Bezuidenhout, who left Mango on Friday after 10 years as CEO, says his greatest concern is that after he has gone, government interference in the state-owned low-cost airline will reduce it to SAA's level.Bezuidenhout, 39, has led Mango from when it started in 2006. In stark contrast to other state-owned airlines, it has been profitable for eight out of its 10 years. The key to its success, he says, has been a lack of government interference."Mango has been well insulated from the shareholder and from any form of political meddling. That is why we have been profitable ..."Last year it made a loss while he was acting CEO of SAA.He says management mistakes were made in his absence. But his real concern is that, with him out of the way, Mango's independence will be "meddled with", he says.story_article_left1"That will be a slippery slope for that business. Key to Mango's success is that it has been immunised from the bad practices in the SAA group. Its labour pool is separate, its cost structure is separate, its procurement is separate. Everything of Mango is done separately. If you start changing that, then you're going to have a loss-making business."Ironically, Mango's low-cost competitors have attributed its success to government intervention, which, they say, has given it an unfair advantage.Their suspicions seemed to be confirmed when SAA chairwoman Dudu Myeni said last month that the national carrier had subleased Mango's entire fleet of Boeing 737-800 aircraft to it at a discounted cost while paying the leasing company the market rate.This would have given Mango a crucial advantage over its rivals in the highly competitive low-cost space.It was a "necessary investment" to support Mango, said Myeni, effectively discrediting any role Bezuidenhout might have played in its success. There was no love lost between them, and the fact that her statement came hot on the heels of his announcement that he was leaving to be CEO of London-based low-cost carrier Fastjet raised questions about her motives.When the competition authorities said they would investigate a breach of the Competition Act by SAA after a complaint was laid by the opposition DA, SAA retracted Myeni's statement, saying it was inaccurate.So how dependent was Mango on SAA or state support?"Zero," says Bezuidenhout. "Absolutely zero dependence on government support. Mango leased its aircraft from SAA at market-related rates."Was Myeni just trying to discredit him?"On reading her press release, that perception may well be created, yes," he says.He can't say more because of commitments to the Mango board that he would not be too nasty about Myeni or SAA. We saw the benefits coming through, saw SAA's financial performance starting to improve. It is frustrating when you read in the press how these things are being undone Bezuidenhout concedes that he owes Myeni and the SAA board "less than zero", but doesn't want to drag Mango down to their level."Mango tries its utmost to remain a professional organisation and not get tainted by what happens at SAA."If he and Mango were as insulated from political interference as he claims, why did he decide to quit?"It would be dishonest not to admit that I've seen a fair level of frustration at an SAA level," he says. "Eventually it is disheartening to operate in such a highly volatile environment."A major contributing factor in his decision to leave was the last-minute scuppering of a deal between SAA and Dubai-based airline Emirates that he had worked hard to secure while acting CEO of SAA.It was never an equity deal as reported in some media at the time, he says.It was a multifaceted commercial partnership and co-operation deal between the two airlines similar to the one between Emirates and Qantas which has served the Australian airline so well.It would have entailed, among others, minimum revenue guarantees of $100-million (about R1.4-billion) a year in favour of SAA, joint procurement exercises, skills transfers and first right of employment in Emirates, the second-largest international carrier in South Africa after SAA, for retrenched SAA employees."When a carrier like SAA gets the opportunity to strike a strategic deal with the biggest international carrier in the world, which has recently been rated as also the best service airline in the world, that is not something that you don't pursue," he says.He was in Paris to sign the deal when he got a call from Myeni, who was supposed to be there with him for the signing, ordering him not to."The board does not approve," she told him when he asked why.He says: "It was very awkward to have to walk into the hotel the next morning and tell the CEO of Emirates that we will not be doing this transaction."Bezuidenhout - who until then had full board approval for the deal - felt like he had been punched in the gut and suddenly found himself disillusioned about the future of SAA."That was a massive opportunity that was lost. And I was not happy with the outcome. It would have been easier for me if I understood what the motivating factor was behind it. That and who killed JFK are two big mysteries to me."SAA, which had announced that Bezuidenhout's contribution in "returning SAA to relative stability" was "critical", terminated his role as acting CEO and he returned to Mango."We managed to get a lot of things done at SAA," he says. "We saw the benefits coming through, saw SAA's financial performance starting to improve. It is frustrating when you read in the press how these things are being undone."Although SAA is still benefiting from some of the changes Bezuidenhout made, it is technically bankrupt.He says this should be seen in the context of an aviation market that is, in fact, in good shape."In the past 12 months, Lufthansa, Delta, United and Emirates have all announced record, record profits."Meanwhile, SAA has still not issued a financial statement for 2014-15."This triggers all sorts of serious consequences," he says. Consequences which could prevent it from operating as an airline even if, according to Myeni, it has the money, its aircraft are always full and it can survive without government guarantees.It cannot continue to operate for much longer without issuing a signed-off, audited financial statement, he says.story_article_left2This is the real crisis staring it in the face if its stand-off with Finance Minister Pravin Gordhan is not resolved.Gordhan has reiterated his position that without a new board at SAA there will be no government guarantee.Without a government guarantee there can be no financial statement."Without financial statements things start becoming increasingly difficult."What do you do when the licensing council wants to see your audited financial statement and the last set you can produce is two years old?"Meanwhile, Bezuidenhout is heading to London to run the ailing pan-African Fastjet carrier after the previous CEO, Ed Winter, was dumped.Winter said he had "vastly" underestimated the difficulties of doing business in Africa."It's not the first time the African aviation market would have been misjudged by, especially, non-Africans," says Bezuidenhout."There's no doubt that doing business in Africa is very different to doing business in the UK or Europe."Trying to address African aviation problems using UK or European solutions is a "cardinal sin", he says. "It is important to localise solutions and take account of local nuances."He intends moving the head office to Johannesburg as soon as possible...

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