Gidon Novick (left), one of the people trusted with getting SAA back in the skies, is prepared to face criticism of the airline’s new ownership. (Photo by Brenton Geach/Gallo Images via Getty Images)
Gidon Novick, one of the people trusted with getting SAA back in the skies, is prepared to face criticism of the airline’s new ownership. “There will always be detractors. You can’t make everybody happy,” he says on a phone call with the Mail & Guardian on Sunday.
Days before, Public Enterprises Minister Pravin Gordhan announced that the government has relinquished its majority shareholding in SAA.
Novick is the chief executive of Takatso — the consortium that, after billions of rands in bailouts and 18 months of business rescue, will take control of the beleaguered national carrier. Takatso consists of Global Airways — which owns Lift, the budget airline co-founded by Novick — and private equity firm Harith General Partners.
The announcement has been celebrated by some. Others have cried foul over the deal with Takatso, which has committed to putting R3-billion into the operation over the next three years. The National Union of Metalworkers of South Africa, the airline’s majority union, said on Sunday it is seeking legal advice regarding SAA’s privatisation.
Novick says: “People will do whatever they can to protect their interests. And that’s fine. That’s part of life. Those things, I have learned, are just part of this particular journey of pulling together a partnership between a private group of organisations and a major government department.”
Finding each other
Negotiating the SAA acquisition took time, Novick says. “It took a while for us to find each other; to understand each other,” he says.
“My understanding and appreciation for politics has grown exponentially, although I still have a lot more to learn about that world. But I have a much better appreciation for the political considerations. My lens has always been commercial.”
The Takatso deal means SAA will no longer be dependent on the fiscus. Last Friday, when he announced the new majority shareholder, Gordhan said the government has “drawn a line in the sand”. The minister said: “As far as the new airline is concerned, the government will not be putting in any more money. And that’s a clear message that we would like to communicate.”
The consortium will provide funding for the restructured airline, which will eventually be listed, meaning the public will be able to buy shares in SAA, Gordhan said on Friday morning. The government will keep a 33% non-dilutable golden share. New SAA board seats will be allocated in accordance with the proportions of ownership.
Novick is confident in the government and the private sector being able to work together. “We don’t have to have this idea that there is government and there is business and there is this incongruence between the two.”
He cites the government’s recent decision to free up South Africa’s energy market by allowing private companies to generate 100 megawatts of electricity without a licence. The surprise reform, announced by President Cyril Ramaphosa last Thursday, is aimed at reducing the burden on Eskom, which, like SAA, has amassed billions in losses.
The decision has also been criticised for forming part of an agenda to privatise the country’s state-owned entities. But Novick calls it “a glimmer of hope. There is hope and confidence that we can do stuff here.”
The best time
Last Friday, Novick said some people have called him crazy for taking on SAA when the future of aviation is still so uncertain. “Ironically, we believe quite strongly that it’s the best time,” he said at the press briefing announcing the majority shareholder.
Air travel is making a comeback, Novick tells the M&G. “Even though it is a little bit stop-start with the various waves of Covid, the general trend — not only in South Africa, but globally — is that travel is coming back.”
According to a January report by air-travel data-analytics company Cirium, global passenger airline traffic in 2020 was reduced to 1999 levels. Between January and December 2020, 17.3-million scheduled passenger flights were completed globally, marking a 49% drop compared to 2019.
Novick says the hit to the industry means that there is a lot of talent that has gone untapped over the past year. It’s also a good time to buy new assets, he says. “The value of aircrafts — good quality, fit for purpose aircrafts — has come down by more than 50% over the last year and a half. That obviously makes a massive difference to the economics of an airline.”
The pandemic has exposed weak business models, Novick says. “There is a need for new models to emerge.”
The new model, Novick explains, is demand-driven, whereas typically airlines make heavy cost commitments in the hope that demand will follow. A demand-driven model will be important because, even beyond Covid-19, it is difficult to predict the rate of economic recovery and how people will behave, he says.
“The model that we see as critical, not just for our industry but for capital-intensive industries generally, creates agility. It creates the ability to change tack … to scale up or to scale down.”
‘We can only go up from here’
Novick says there is no date currently set for SAA’s relaunch. When operations do get up and running, the airline will start with a smaller fleet and a reduced network of routes. “Our thinking on return is quality rather than quantity. And that will be the philosophy going forward,” he says.
“It will take years, maybe decades, to get back to the size that SAA once was. It’s going to take a long time.”
Among the challenges SAA will face when it does begin flying again is its lost share in the market, which has left space for other airlines, including Novick’s Lift, to muscle in on the national carrier’s turf. Last year private airline Airlink cut ties with SAA and announced the launch of a number of new routes that would fill the gap left by SAA.
Of SAA’s reduced market share, Novick says: “We can only go up from here.”
Novick is also concerned about the reputational damage to the airline. “Sometimes we play down the gravitas and the massive potential of SAA’s national brand. And for good reason. SAA has represented everything bad about the country: inefficient, corrupt, self-serving, political … It has represented the ugly side of this country.”
But Novick is prepared to face any of the challenges that may arise. “There will be many … There will be many hurdles,” he says.
“This is something that has a lot of interest. People feel they have a stake in this entity — regardless of who owns it, whether it is private or government … That level of interest will create various issues and disagreements. And we’ll deal with them.”
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