SAA Goes from Stardom to Obscuirty: Languid governance tripping over unprecedented industry shifts:

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Johannesburg Business School Contemporary Management 

As 2020 has proven to business and society that the future remains uncertain and volatile. Often times, management has to navigate through a complex business environment, cloaked with immense volatility, uncertainty, and ambiguity (termed the ‘VUCA’ world by experts), in order to stay relevant and simultaneously maintain their market competitiveness. In appreciating this brittleness and incomprehensibility, management has been challenged to employ non-linear strategies to navigate through such anxieties about the future.  

Aviation/ Airline industry overview

Aviation is consequential to global tourism. The advent of the COVID-19 pandemic, wherein global economies were forced to a shutdown of economic activities, which meant that the aviation industry would be one sector to experience the wrath of this uncertain reality, as cross-country travel was highly restricted during this period. The Oxford Economics (2020) reported an 86% loss of revenue in the global tourism sector with the introduction of travel restrictions in April 2020. In addition to this shockwave, South African Airways (SAA) also had to deal with the shifting industry developments of technology in the market, thus adding to its underlying unsavoury issues of corporate governance. As the debate between the distinctive roles that management and leadership ought to play in this VUCA world intensifies, this article aims to emphasize their unique significance in an on-going industry shift. 

Purpose - SAA Contemporary Management Analysis

Contemporary management follows a trajectory where the process in management becomes a tool for innovation instead of being an analytical instrument for strategy. In view of the fact that leadership concerns establishing direction in an organisation, strategy ought to be the long-term direction of an organisation (Whittington et al 2020). With many organisations having permanently closed shop after being swallowed by the recent shockwaves brought by the COVID-19 pandemic, a critical question now arises as to where SAA is headed, and what its future looks like?

The developments around South Africa’s national carrier (SAA) delineate a historical pattern in a process devoid of any firm strategic goals and direction, which has led to the institution going for Business Rescue in its attempt to save the ailing national carrier. The emerging VUCA environment requires that companies become disruptive and creative in their pursuit to sail through these unprecedented shockwaves, while also forging a new offensive against an unstable reality. In this new normal, businesses need to reflect thoroughly on their initially adopted competitive strategies, and consequently, pivot to emergent strategic approaches where business models are aligned to processes which enable management to be agile and flexible in delivering business prosperity.  

SAA, failure in management or leadership broken?

Leading to the dawn of South Africa’s democracy, SAA controlled approximately 95% of the local market and most of air traffic in Africa (Wasserman 2020). The monopolistic market structure continued frustrating any pending competition up until 1991. At this time, deregulation was initiated in the airline industry thereby opening the market to new domestic and international players. Lee and Ahn (2006) described deregulation as a process of introducing market competition and privatization, leading to market-driven reforms, thus enabling new entrants to fly any route in the local market.

While many new companies (1time, SunAir, Phoenix, Nationwide) continued to fail under the dispensation of deregulation, citing unfair competition through SAA with its continued government support, other companies (Comair, FlySafair) thrived and gained ground (Wasserman 2020).

Deregulation prompted a significant industry shift. In her book Seeing Around corners Rita McGrath (2020) appropriately defines such an industry shift as an inflection point:

“a change in the business environment that dramatically shifts some element of your activities, throwing certain taken-for-granted assumptions into question.”

Without warning, the airline industry was an oligopolistic market structure consisting of a few competitors coupled with product and service variations, but still with high entry barriers (Collinson et al 2017). However, inflection points take a long time to unfold. Similarly, the decline of SAA became a process over a period that resulted in the current state of affairs.

In comparing management and leadership, Kotter (1990) writes that the former is focused on resource controlling whilst the latter is about developing a vision for the future. Management is about navigating through the routine complexities, whereas leadership concerns the relevance of formulating a winning competitive strategy in a changing business environment. In this distinction by Kotter, there is an unassertive account of these concepts being fragments of an organisational process, thus it should be emphasized that a process of leadership is one where the complexities of a business influence a group of individuals to achieve a common goal. In this process, leaders ought to be at the centre of change (direction) and engage in the complexities of the business.

The shift in industry regulation prompted leaders of airline businesses to act with agility and sense any pertinent threats (new entrants), and simultaneously cease conceivable opportunities, in order to be and stay relevant. However, SAA was not able to optimise the market conditions for a competitive advantage, especially with its continued reliance on government support. As is always the case that the cost of being too slow to identify threats and opportunities on the competitive horizon can be devastating, SAA, once the pride of South Africa and her people, currently finds itself in this devastating downward trajectory, as new market entrants swallow up profitable routes and market share, with FlySafair becoming the biggest domestic airline within six years of its founding (Wasserman 2020). The management of SAA failed to optimise the complexities to deliver change at that moment while the leadership was crippled (broken) to deliver tomorrow.