South African Air’s New CEO Plans Review of Alliance Ties

South African Airways, the region’s biggest carrier, will explore closer ties with local operators while reviewing the benefits of its Star Alliance membership, Chief Executive Officer Monwabisi Kalawe said.

Kalawe, who took the post June 1, said he has received messages from Ethiopian Airlines Enterprise and Kenya Airways, sub-Saharan Africa’s second- and third-largest carriers, indicating they’re keen to explore “win-win relationships.” He also plans to talk with Star CEO Mark Schwab in the coming months to establish what unprofitable SAA gains from the group.

A restructuring plan for state-owned SAA that seeks to cut costs, refresh the fleet and focus on money-making routes is poised to go before South Africa’s Cabinet, Kalawe said in an interview. He said he was targeting July or early August to reveal details to stakeholders, including tourist groups concerned that service to Cape Town may be curbed.

“I’m not able to discuss its contents but it’s a pragmatic and well-considered document which I fully support,” he said at the Paris Air Show. “SAA, in my view, is not in crisis. It’s an organization in distress, but it’s got pockets of excellence.”

Kalawe said he’s aware of the “aggressive” challenge posed to African airlines by Gulf carriers such as Emirates that are increasingly targeting the region. At the same time, there may be possibilities for cooperation, he said. SAA recently signed a deal to share booking codes with Abu Dhabi-based Etihad Airways.

Balance Sheet

SAA had a loss of 1.36 billion rand ($137 million) in the year through March 2012 and has faced management upheaval, as well as calls by the nation’s opposition party for a selloff.

Kalawe said he’s buoyed by a public pledge from the government to bolster the Johannesburg-based company’s balance sheet, as well as the endorsement of longer-term planning implied by the 20-year span of the restructuring strategy.

“That’s the kind of timescale I’m used to in the infrastructure sector,” said Kalawe, who ran South Africa’s secondary airports before becoming general manager of the Cape Town hub. He said he also ran Denel Munitions, helping to broker a 51 percent investment by German arms maker Rheinmetall AG.

The CEO said it’s too early to say how SAA’s leadership structure will be modified following his appointment, or what role will be played by Deputy CEO Nico Bezuidenhout, who has been acting CEO.

‘Reignite Pride’

The airline plans to order 25 to 35 wide-body jets by the end of August as it seeks to renew an aging fleet, Bezuidenhout said June 3, with the Boeing Co. 787 and Airbus SAS’s A350 under consideration. New planes are required starting in 2017.

Malusi Gigaba, South Africa’s Minister of Public Enterprises, said this month that the chief requirement is to turn around SAA’s finances and that a sale isn’t under consideration.

Kalawe said that SAA has lacked direction and that his chief aim is to deliver stability and to “reignite pride” in the brand.

“I’m positive about the fundamentals,” he said. “Africa has seven of the fastest-growing economies in the world, and a lot of South African multinationals are also expanding into the rest of Africa. So there’s a positive story in terms of both passenger flows and belly freight.”

(For more from the Paris Air Show, see SHOW.)
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