“The book is not about me. I never intended to write a memoir or ‘lessons learnt by a CEO’,” says Glenn Orsmond who was formerly at the helm of Comair, which owned low-cost airline kulula.com and operated British Airways flights domestically as part of a franchise agreement.
Orsmond had three stints at Comair, as CFO between 1995 and 2003, as CEO between June 2019 and March 2020 and again as CEO between November 2020 and May 2022.
His newly released book, Crash and Burn — a CEO’s crazy adventures in the SA airline industry, gave him the opportunity to give his perspective on how Comair, an airline with a 75-year success story, ended up in a situation of “crash and burn” so suddenly — and under his watch.
...I was shocked that the company had lost control of its costs and eroded its cash
— Glenn Orsmond
“It is very convenient to blame Comair’s failure on the Covid-19 pandemic or the Civil Aviation Authority (CAA) grounding it, but one has to bear in mind that other airlines like Safair and Airlink faced similar challenges and groundings, yet, pulled through — even grew stronger,” says Orsmond.
In his view, Comair became successful and stayed successful for many years because it strictly adhered to the principles of keeping costs low, protecting cash and avoiding excessive debt. “At some point in its history — and before I became its CEO for the second time — those principles were thrown out the window and then, when external shocks happened like the pandemic and the CAA grounding, there was no foundation to withstand them,” he explains.
Ending up not having any board members with aviation experience during the business rescue process also contributed.
Insufficient cash
“When I returned as CEO the second time, I was shocked that the company had lost control of its costs and eroded its cash. It had huge operating losses and started to take on excessive debt by buying Boeing MAX aircraft, which were not affordable.
“When I took over again during the business rescue process of Comair, my team and I managed to reduce costs, but we did not have sufficient cash for when shocks like [Covid-19] hit — the cupboard was bare.”
In his view the decision, taken before his return to Comair, to purchase eight Boeing MAX aircraft at R1bn each, was a “vanity project”.
“The pilots had a lot of power and wanted to fly the latest aircraft and maybe some management inertia had also set in,” he says.
According to Orsmond, by the time he returned to Comair, there were many inefficiencies. Pilots were earning about 30% to 40% more than their peers at Safair, yet they worked about 30% to 40% less. The same went for cabin crew and airport staff.
“It was difficult to negotiate with the unions to make Comair more profitable. I failed in that. I could reduce the headcount but not the costs … the unions were short-sighted. They went on about rights — and yes they were correct that we could not impose salary reductions — but they did not believe us that the status quo was not sustainable. So, in the end everyone lost their jobs.”
Comair had 40% of the SA domestic market and when it failed, Safair and Airlink took the gap, according to Orsmond. In his view, only about 30% of the void left by Comair’s departure has been filled and there remains a shortage in the market.
“Ticket prices immediately went up and … the real losers were Comair employees, the shareholders and the flying public,” he says.
More waves
Asked what he could have done better, he says that when Comair’s rescue plan was approved, it was a mistake not to foresee the possibility that more waves of Covid-19 could follow.
“In our business model we did not factor that in as, at the time, the conventional wisdom was that a vaccine was imminent. The other problem was that SA’s version of business rescue is not recognised by foreign countries, so we could not renegotiate our foreign contracts and were stuck with higher costs,” he explains.
Does he have any regrets? “Not in terms of my career. Yes, I have made mistakes and owned up to them and talk about them in the book. Once Covid-19 happened, I should have reduced costs even quicker. And somehow I failed to convince the stakeholders — such as the unions, creditors and aviation authorities — to give us more time, especially to get to the high summer season,” says Orsmond. He tries to make clear in the book how cut-throat the aviation industry is and how personalities often drive decisions instead of sound business principles.
Examples he gives include Comair not accepting an offer by the troubled airline Nationwide to buy its planes, Sun Air not taking up an offer by Comair to form an alliance and have positions on the board, and Comair being uninterested in buying shares in the airline 1Time, of which Orsmond was a co-founder, at the time.
In his view, all these decisions had a big impact on these various businesses and their downfall.
“Among the lessons I have learnt is that, for any business to succeed, you need united shareholders and a united board so that you can have a united management team. As soon as there is division, it leads to failure. And … in the real world personalities often override what should be sober sound business decisions.”
He says he keeps learning and is still involved in the aviation industry, but “on a lower-profile basis”
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