CEO Thomas Kgokolo recalls the bold decisions he had to make at SAA

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Financial Minds: CEO Thomas Kgokolo

CEO Thomas Kgokolo recalls the bold decisions he had to make at SAA

Dec 10, 2023 | Strategy & Leadership

During the first month as Interim CEO of SAA, Thomas Kgokolo had to spend a lot of time with the Business Rescue Practitioner to understand the rescue plan so as to oversee its implementation. Determining the restart date was not a simple thing because the way SAA is designed, decisions such as those require approval of the board as well as the shareholder represented by the relevant government minister.

A further complication was that SAA could not announce a restart date without pilots who had not been paid for a year. The key thing was to get them to agree to return to work. Thereafter, they cannot immediately jump into the aircraft and fly; they need to be reintegrated to the airspace beginning with simulations. Thomas went down to Cape Town to meet with them and understand their demands. They were very disappointed with government and took hard positions.

Clean slate

‘I wanted to start on a clean slate and not get caught up in the shenanigans of the past,’ recalls Thomas. ‘Still, they were adamant that they wanted more money which we simply did not have. The prolonged strike meant that many were on the verge of losing their cars and houses. We went back and forth and at times it got ugly with the pilots calling me and the rest of the board all kinds of names. Eventually, we reached out to the pilots individually where we made offers of back pay to ease their financial pressure and retrenched those who were not willing to return so as to enable them to access their pensions.’

Majority of the pilots came back and SAA could then apply for their Airport Operating Certificate (AOC). It wasn’t simply a matter of filing a renewal notice because the airline had some significant findings following the departure of quality control personnel during the prolonged down time. Management put measures in place to address the findings and eventually got the AOC in May 2021.

‘Many people believed that SAA was dead and I had to go on TV during the months of June and July to get the word out that we would be returning,’ says Thomas. ‘Another issue we faced was getting the aircraft back from the lessors who had seized them when we went into business rescue at the onset of the COVID-19 pandemic. We then needed to assess which routes made the most money and here there were a couple of surprises. Whereas Johannesburg-Cape Town is possibly the busiest route on the continent, it is not very profitable.’

The team had to think beyond domestic routes and go international. SAA had a monopoly when it came to Johannesburg to Accra and Lagos and so these were top of the list when the airline restarted in September. Unfortunately, there was not enough business revenue as people had become accustomed to online meetings and some countries still had strict COVID protocols. However, people were tired of being locked up in their houses and tourism began picking up.

Omicron

The company was on the mend before the omicron variant of COVID was announced in December. Nigeria took the same stance as the UK of blacklisting South Africa which dampened anticipated high revenues over the Christmas period. SAA reopened Johannesburg-Cape Town because it was a good network enabler as someone flying from Accra to Cape Town could book one ticket. It took a while for people to know that they were flying again because the company did not have the budget to go on an advertising spree and had to rely on public relations and word of mouth.

‘We also had a massive database of our voyager loyalty programme and so we could send emails to reach out to customers. By the time omicron struck, we had some of our customers stuck in Mauritius as borders closed up again. We had to pause Mauritius and other routes due to the pandemic as well as stiff competition from Comair. They were very aggressive and I argued at the time that it would not be sustainable because an airline cannot be able to meet it costs if it flies 40 people on an aircraft that should carry 160.’

Strategy

‘An aggressive strategy also leads to issues of reliability and consistency which I was adamant we needed to avoid. Besides Comair, Safair launched a price war by introducing such campaigns as the R10 flights. We took the view that we were serving a different customer base; businesspeople who wished to fly in comfort. Besides, the airline industry was in survival mode rather than growth; you cannot force growth to happen in a market that does not allow it. By making sound decisions on which routes to operate, we managed to improve the cash flow of SAA tremendously such that by early 2022 we were not burning cash.’

Thomas believes that leadership is about managing relationships especially in a complex environment such as a state-owned entity. You need a good relationship with government, employees and different unions. You need to foster a good executive committee and to also engage media appropriately. ‘This was an important issue with SAA because unlike private airlines, everyone thinks that they have the right to express an opinion on how the flag-carrier should be run. As such, you have to make yourself available as the CEO of SAA to explain to the country why you are making the decisions you make. It calls for transparency and effective communication.’

A leader also has to be smart in his decision making and to exhibit boldness. You need to make a decision even if people oppose it. When you make a decision that is unpopular, you should do so with clear reasons. A good example is the Durban route which government advocated for vigorously during the December holidays. Thomas had to put his foot down and say no. This was a very bold thing to do given that government is SAA’s shareholder and there is therefore a power imbalance in those deliberations. He had to explain that whereas it made sense politically, it did not make sense commercially because the route would be loss-making.

This article is an extract from the book THE CEO X FACTOR – available here https://www.takealot.com/the-ceo-x-factor/PLID92980382

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