A report commissioned by the Public Enterprises Evaluation and Privatisation Agency (PEEPA) in its bid to implement a fresh privatisation of Air Botswana has painted a bleak picture of a parastatal in a chaotic state.
Following a failed privatisation exercise in 2017, PEEPA later engaged Deloitte & Touche to, among others, review Air Botswana and submit a report detailing and recommending “the required changes and high level implementation road map (“transition plan”) for the operations of Air Botswana to be profitable and sustainable.”
Painting a picture of ‘a blind crew flying an aircraft,’ the report found that it is not definitive as to who forms part of the Executive Committee at the airline as this has been left to discretion.
“Currently EXCO comprises the general manager, chief operations officer, director corporate services & strategy and other departmental heads by invitation,” the report says.
It says with the executive committee being responsible for core business operation decisions which require planning and consideration of interlinked processes, a non-definitively constituted EXCO team is not ideal as the discretionary invitation has a potential of excluding critical functional representation in the planning and decision making process. Good corporate governance requires a definitive structure that will be responsible and accountable in order to drive shareholder value, increase efficiencies and ensure sustainability.
Potential resultant risks associated may include: Resistance and lack of buy in by other senior members of the organisation on decisions made by a non-fully representative structure, lack of accountability, bureaucratic and slow decision making and inefficient communication resulting in poorly communicated priorities.
The Strategy office has been placed under the Director, Corporate Services which is contrary to best practice.
Ideally this function should report directly to the General Manager for efficient corporate planning, execution and monitoring. The Security function reports directly to the GM. This has bloated the number of direct reports to the GM. The function of security should be an outsourced service managed under by the Administration Business Unit. Customer and Ground Handling Services is the largest department in terms of staff numbers, constituting about 39.1% of the total workforce of Air Botswana.
“This department however features two distinct and important functions that should be independent of each other to be managed efficiently,” the report said.
The report says for Air Botswana, key signs that it is appropriate to reconsider their corporate structure include: The absence of a defined go to market strategy, Significant areas of functional overlap in the organisation, Limited integration and synergies constraining ability to respond to market changes (competition, pricing, cost reduction measures and No unified view of the customer segments as well as to the management and oversight of vendor and supplier relationships.
It says the current functional structure is not available (2016 proposed structure not implemented).
According to the report, there is a discrepancy between the Proposed Organisational Structure and the Manpower plan provided. The manpower plan was used to gain insight into the details of the high level processes of the individual functions.
The report also suggests that the government is clinging onto the airline and how it should be operated, something that also contributes to continue being a loss making entity.
“A large number of routes are loss making but are mandated by government The annual cost of these should be established and be subject to structured support from the Government so there is transparency and Government has awareness of the specific cost of the policy Formal policy should be developed and agreed with Government as this would be an expectation from any future investor,” the report says.
The report called for segregation of the commercial and public / social agendas that will ensure cost recovery for the provision of a baseline level of aviation services in Botswana. Includes agreement on the mechanisms, processes and policy for annual funding of the Airline by Government of loss making routes.
According to the report, “Transformation of the Airline in the short medium term will require focused coordination and alignment of multiple work streams and initiatives that do not form part of “Business as Usual”.
This should include, the report says, alignment across commercialization projects, development of alternative delivery model business cases, implementation monitoring of strategic initiatives, driving operational efficiency and cultural change in service excellence.
The report says of the key findings from the review of Air Botswana’s operating model highlighted the following key challenges: Limited diversification in product/service m ix: Revenue from passenger services consistently accounts for the largest share of total revenue for the airline, approximately 60% in 2018; whereas freight & mail (revenue from cargo), ground handling and commission earned from advertising each account for less than 1% of revenue generated within Air Botswana.
The report also found that there was inconsistent service delivery.
“There appears to be conflicting passenger views regarding the quality of products and services being provided by Air Botswana which are deemed to exhibit a declining trend. For example, Air Botswana has been described as being an airline of good quality that provides a delightful experience having clean airplanes with lots of leg room as well as efficient and friendly staff amongst others,” the report says. It added that, “On the contrary other passengers have described the airline as unreliable particularly with regards to keeping time with dishonest and unprofessional staff etc.”
Some of the highest rating service criteria for Air Botswana includes; cleanliness; check in and boarding whilst the lowest rated criteria includes food & beverage, inflight entertainment, value for money and customer service.
The report also found that there was insufficient communication with customer.
“It has been reported that when flights are cancelled or delayed some of this information is not communicated to customers timeously. In the instances where customers are notified of delays or cancellations in advance, staff members sometimes do not to provide justification or rationale as to why nor do they provide the necessary support to passengers e.g. displaying disinterest in assisting passengers with a connecting flight,” the report says.
It further found that the airline appears to suffer from an excessive staff numbers across all metrics benchmarked, insufficient training and an under investment in IT infrastructure.
“In addition, the airlines current structure differs from the IATA business plan, therefore comparison between them may not be appropriate. Employee costs have been increasing YoY from FY13 to FY17 due to increases in the staff numbers. Functions with the highest staff counts are Customer and Ground Services, and Flight Operation with both contributing on average 36% and 25%,” the report says. It shows that Air Botswana has already implemented cost reduction exercises such as organisational restructuring and re fleeting to reduce operational cost and maintenance costs.
From a financial perspective, the report says, it is the government’s intention to reduce its subsidies/subventions to Air Botswana and financial commitments in the sector whilst ensuring that there is sustained business travel within and, to Botswana whilst serving the growing tourism strategy and the resulting travel demands in the country.
“Lastly, it is envisaged that the privatised airline should retain the brand of Botswana in any future airline entity,’ the report says.
