Carolus faces tough choices at bidirectional SAA
October 6, 2009
With Cheryl Carolus, a former chief executive of South African Tourism, now heading the board of SAA, the national carrier may put more emphasis on helping to build up the country's tourism industry.
But the uncomfortable truth is that in being urged to do so, SAA is being asked to do two contradictory things. The state-owned airline is also under intense pressure to be profitable and since the biggest profits come from business travellers, it, like other global airlines, has been giving priority to attracting them.
Most international airlines spend lavishly on benefits for business-class passengers. Competition is intense, and since SAA has been strapped for cash, it finds it difficult to keep up on some routes.
It had to withdraw from the Paris route, despite the fact that South African Tourism had identified France as a growth market, because it simply did not have the aircraft available to compete with Air France's more frequent flights on larger, more comfortable planes.
Khaya Ngqula, the last chief executive, was understandably envious when the Namibian government decided a few years ago to continue to subsidise its national airline, Air Namibia, because it brought German and British tourists to the country.
But even if the South African government had been willing to buy market share to attract more tourists, our independent airlines - Comair and 1Time - which pay tax on their profits, would have been infuriated to see their money being used to bolster the opposition.
Carolus earlier accepted an invitation to join the SAA board when she still headed the national tourism organisation, but resigned almost immediately when she realised their interests differed.
Under acting chief executive Chris Smyth, SAA is certainly trying to support tourism, as Minister of Tourism Marthinus van Schalkwyk acknowledged recently. And its emphasis on strengthening its route networks in Africa are likely to bring more African visitors with money.
Too far ahead of the curve
Only last week the International Monetary Fund upgraded its global growth forecasts for this year, from the minus 1.4 percent it predicted in July to minus 1.1 percent, and for next year from 2.5 percent to 3.1 percent. But celebrations were short lived.
Having got over the excitement of glimpsing green shoots in a previously devastated global economy, investors are now being pursued by the spectre of the "new normal".
Essentially the new normal means, when the recession is over, the world will experience much lower growth than the rates seen in recent years. And lower growth will generate much lower returns than investors received in the past.
Moreover, a number of luminaries are warning the worst may not even be over. They include Dr Doom himself - New York University professor Nouriel Roubini, who forecast the financial crisis long before others acknowledged the dangers.
Roubini told Bloomberg at the weekend: "Markets have gone up too much, too soon, too fast.
"I see the risk of a correction, especially when the markets now realise that the recovery is not rapid and V-shaped, but more like U-shaped.
"That might be in the fourth quarter or the first quarter of next year."
So markets could tank later in the year as players realise the economy is moving through a long, long trough rather than bouncing straight back.
And HSBC chief executive Michael Geoghegan outgloomed Roubini, warning of a double-dip recession. He is reluctant to allow his bank to grow too fast because it could face a second slump.
Also full of gloom is Nobel prize-winning economist Paul Krugman. Writing in the New York Times, he predicted US unemployment, which hit 9.8 percent last month, would peak at 10 percent, and warned against any withdrawal of liquidity from the global financial system.
No wonder markets suffer from mood swings.
Lucky options for some
At what stage, one wonders, will shareholders start to hold remuneration committees to account? There is little doubt that the egregiously inappropriate pay packages awarded to senior executives over the past decade or two have been part and parcel of the moral and financial bankruptcy that now characterises so much of the corporate world.
The consequent difficulties are not just experienced in the financial powerhouses of the world, such as New York and London, but also here on our own doorstep.
In the time between the creation of Johncom, which became a powerful telecoms giant, and the birth of Avusa, a media company with more modest ambitions, huge fortunes have been awarded to dozens of senior executives. In most cases these fortunes were awarded for share price performances that had little or nothing to do with the actions of the executives.
Recent news that current Avusa chief executive Prakesh Desai has been forced "by circumstances" to exercise his share options earlier than initially anticipated, is really just par for the course.
The huge financial reward picked up by the very modest Desai is particularly galling at a time when newspapers are cutting back on funding essential operations such as news gathering.
Of course the Avusa institutional shareholders will do nothing as they are complicit in this appaling and inappropriate limited enrichment.
Mind you, at least the public gets to see what the executives get at Avusa; over at the Independent, which publishes Business Report, the remuneration packages and bonuses paid out to top local executives are all just a matter of troubling conjecture. No details have to be published as the group is wholly owned by a foreign-listed entity.
Edited by Peter DeIonno. With contributions by Audrey D'Angelo, Ethel Hazelhurst and Ann Crotty
|
|
