Failure to implement a turnaround strategy at South African Airways: Reflections from strategic players

ABSTRACT

For a number of years now, the South African Airways limped from one turnaround strategy to another, with little or no success. While there is a body of knowledge on turnaround strategies, little is known about the implementation of turnaround strategies in developing economies such as South Africa and of state-owned enterprises at that. The aim of this article was to explore some constraints experienced by SAA in the implementation of its Long-Term Turnaround Strategy. Purposive sampling was used to select participants to be interviewed for this study. Data were collected primarily through semi-structured interviews from 37 participants. Using thematic analysis, the following six themes emerged from the data analysis: shareholder’s slow decision making, undercapitalisation of the airline, unstable political leadership, unhealthy board dynamics, leadership instability, and lack of management skills.

KEYWORDS:

• Turnaround strategies
• South African Airways
• state-owned enterprises

1. Introduction and background

For various reasons, businesses find themselves confronted by situations that require them to embark on urgent interventions to turn themselves around (Arogyaswamy et al., 1995; Trahms et al., 2013; Reeves et al., 2015). A growing number of South African State-owned enterprises (SOEs) have been struggling in recent years with some have teetering on the brink of collapse. Simultaneously, Ginting & Naqvi (2020) have observed a declining overall trend of state ownership in SOEs. Leutert (2016) also expressed concern about the role of government-directed reforms at SOEs in improving their performance. Lack of competition and frequent government bailouts for SOEs often leads to inefficient performance and poor public service delivery (Ginting & Naqvi, 2020). In an effort to bring the business back to normalcy, such enterprises often embark on turnaround strategies. Bibeault (1999:1) describes a turnaround situation as ‘an abnormal period in any company’s history’ which requires unique management approaches that are vastly different from those used during a normal period. During such a period, proven management principles routinely used during times of stability no longer become valid (Trahms et al., 2013).

While the subject of turnaround strategy has been researched since the late 1970s there continues to be areas where gaps in our knowledge remain (Schoenberg et al., 2013; O’Kane & Cunningham, 2014). Even so, Boyne (2004) has observed that most of the empirical research into turnaround strategies has been conducted in the USA and Europe. Not many studies on turnaround strategies have been conducted in the airline industry. For example, a study by Lawton et al. (2011) investigated how legacy airlines can reorientate themselves to achieve sharp recoveries in performance following prolonged periods of stagnation, decline and eroding competitiveness. Another study by Rosnan & Mahmod (2015) which investigated the turnaround strategy for the Malaysian airline found that mastering operational excellence and unleashing organisational talent capabilities, among other factors, led to profitability for the airline. Chingosho (1998) explored the turnaround strategies for the Southern Development Cooperation (SADC) airlines with specific reference to Zimbabwe Airline. More recently, Chacha (2019) determined the impact of turnaround strategies on business performance of Kenya Airways.

Evidently, many studies on turnarounds in the aviation industry tended to focus on the impact of the turnarounds on business performance. Yet, Trahms et al. (2013) observed that there are still gaps in our knowledge of turnaround strategies and ‘much of the turnaround domain remains uninvestigated’. There is, therefore, considerable room for new contributions to the body of knowledge in this discipline, especially from an African perspective. Hence, the aim of this article is to explore some constraints experienced by SAA in the implementation of its Long-Term Turnaround Strategy (LTTS). This article is organised as follows: It starts with a review of the relevant literature. The article then proceeds to explain the research methodology employed and the research findings. Finally, the article concludes with the recommendations and directions for future research.

1.1. Background of the case

Since 2004, SAA has had four turnaround strategies. In 2005, the airline introduced a turnaround strategy named Bambanani – Let us Join Hands Together. A year later, the SAA Business Restructuring Plan (SAA BRP) replaced Bambanani. In 2011, the airline implemented a growth strategy. In 2013, the airline adopted the LTTS, after which its financial performance got progressively worse over the years (Joffe, 2019). The only turnaround strategy to have been implemented with some degree of success was the SAA BRP, but even it was abandoned when there was a change in leadership. The other turnaround strategies were implemented half-heartedly – if at all – and did not yield the desired results. The airline has had a history of chronic leadership instability and has registered growing losses since 2012. Between 2007 and 2019, it lost a total of R26, 9 billion (Vermooten, 2020).

Between 1994 and 2020, SAA had 14 CEOs, half of whom were Acting CEOs as illustrated in Table 1.

Table 1. SAA leadership changes between 2004 and 2020.

Period	CEO	Board chair
2004–07	Khaya Nqgula	Jakes Gerwel
2008	Khaya Nqgula	Jakes Gerwel
2009	Khaya Nqgula/Chris Smythe	Jakes Gerwel
2010	Chris Smythe/Siza Mzimela	Cheryl Carolus
2011	Siza Mzimela	Cheryl Carolus/Vuyisile Kona
2012	Siza Mzimela	Dudu Myeni
2013	Vyisile Kona/Monwabisi Kalawe	Dudu Myeni
2014	Monwabiso Kalawe/Nico Bezuidenhout	Dudu Myeni
2015	Thuli Mpshe/Nico Bezuidenhout/Musa Zwane	Dudu Myeni
2016	Musa Zwane	Dudu Myeni
2017	Musa Zwane/Vuyani Jarana	Dudu Myeni/JB Magwaza
2018	Vuyani Jarana	JB Magwaza
2019	Vuyani Jarana/Zukiswa Ramaisa	Thandeka Mgoduso
2020	Zukiswa Ramaisa/Philip Saunders	Thandeka Mgoduso

Source: Own compilation.

Table 1 is telling in terms of the leadership instability at the airline over the last decade in which it had 11 CEOs and six Board chairpersons. Table 2 illustrates the political leadership instability at the airline.

Table 2. List of SAA’s Shareholder Ministers between 2014 and 2019.

Period	Shareholder Minister	Portfolio
23 May 2014–9 December 2015	Nhlanhla Nene	Minister of Finance
9 December 2015–13 December 2015	David van Rooyen	Minister of Finance
13 December 2015–21 March 2017	Pravin Gordhan	Minister of Finance
31 March 2017–27 February 2018	Malusi Gigaba	Minister of Finance
27 February 2018–9 October 2018	Nhlanhla Nene	Minister of Finance
9 October 2018–current	Pravin Gordhan	Minister of Public Enterprises

Source: Own compilation.

Table 2 points to the instability of the entity’s political leadership. In a period of just over six years between December 2014 and December 2020, the airline had the same number of Shareholder Ministers.

2. Literature review

2.1. Relevant theories

Among the primary relationships studied in a firm is the one between those employed to run a company and those who own it. That relationship has found expression in at least three theories: agency theory, stewardship theory and stakeholder theory. Agency theory has its roots in information economics and relates to the relationship between Managers and Shareholders, where the former are referred to as agents and the latter as principals (Hill & Jones, 1992; Shapiro, 2005). At the heart of the theory is the assumption that Managers and Shareholders have divergent interests, hence it is necessary to induce agents, through remuneration incentives, to align their interests with those of the principals in order to ensure that agents’ ‘aberrant activities’ are limited (Jensen & Meckling, 1976:308) and that principals’ interests are not compromised (Hill & Jones, 1992). Otherwise, a company run by its owner is bound to be subject to decisions, which maximise the principal’s financial returns (Jensen & Meckling, 1976). Unlike agents, principals are generally believed to always have their companies’ best interests at heart and to act as their ambassadors (Ross, 1973). That suggests that they would not, either directly or indirectly, do anything that would harm their companies’ interests.

Unlike agency theory, stewardship theory is premised on the view that, corporate leaders are ethical individuals mindful of the fact that they are stewards of the companies entrusted to them and are motivated by the need to maximise organisational performance. According to this theory, the extent to which Managers can steward their companies’ assets depends on the degree to which a firm’s structures enable them to do so (Donaldson & Davis, 1991; Fox & Hamilton, 1994). Stewardship theory disavows the existence of an inherent principal-agent problem and emphasises goal convergence between those who are employed to run companies and those who own those companies. This theory posits that stewards get a sense of accomplishment from a company’s success, which they view as their own success, rather than from attainment of their own narrow, selfish interests, and ‘are motivated by intrinsic rewards rather than extrinsic rewards’. These intrinsic rewards include accomplishment of set goals, personal growth as a result of a company’s success and a sense of duty (Pastoriza-Rivas, 2011:116).

Stakeholder theory, on the other hand, states that managing relations with a company’s stakeholders is the primary responsibility of a company’s leadership and that it is a very important part of value creation. While Shareholders are a very important stakeholder group, other stakeholders such as employees, customers, suppliers, governments and communities surrounding a company’s operations are also important and have the potential to impact either negatively or positively on a company’s performance (Phillips et al., 2005; Phillips, 2011; Phillips et al., 2019). Phillips et al. (2019) define stakeholders as any groups or individuals who have an interest in the activities and outcomes of a company and on whom the company relies to achieve its objectives. Stakeholder theory, which Phillips et al. (2005) call ‘a theory of organisational management and ethics’, emphasises the need for a company’s leadership to take the concerns and interests of other stakeholders into consideration, instead of merely focusing on shareholder wealth maximisation, when they make decisions.

2.2. State-owned enterprises and the development agenda

SOEs are an important part of many countries’ economies and exist for different reasons and account for about 10% of the world’s gross domestic product (Peng et al., 2016). SOEs are defined as enterprises or companies in which the State has ‘significant control through full, majority or significant minority ownership’. Included in that definition are companies owned by different tiers of government, ranging from those owned by central governments to those owned by local municipalities (OECD, 2018). Although literature is not conclusive about the developmental role of SOEs, governments generally establish and invest in SOEs to compensate for market failures, which due to their imperfect nature fail to deliver in critical areas such as infrastructure development (Pwc, 2015). SOEs are also created to address capital shortfalls, promote economic development, and provide public services (Ginting & Naqvi, 2020). Governments also use SOEs for socioeconomic transformation through the creation of jobs and skills development (Mtshali, 2016). Yet, many countries face financial losses due to the underperformance of their SOEs (Mtshali, 2016). Recent studies indicate that SOEs consistently underperform private companies (Wang & Shailer, 2018; Tihanyi et al., 2019), causing many to fail to live up to their developmental agenda expectations. The complexity of managing SOEs is accentuated by seeking to balance the following: deciding when and how to grant market forces a greater role, aligning managerial incentives with SOE performance and corporate governance priorities; and overcoming company-level obstacles (Leutert, 2016).

According to Szarzec et al. (2021), the performance and impact of SOEs on economic growth depends very much on the level of institutional quality or environment in which they operate. In this regard, Borghi et al. (2016) characterise high-quality institutions as those with less political interference and better corporate governance, and hence observed that the less political interference and the better the corporate governance, the more likely SOEs will benefit from such high-quality environment. Such lack of institutional quality have led some SOEs to experience significant challenges in their pursuit of a socio-economic developmental agenda. The challenges include being the targets of ‘capture’ by special interests and ‘political appointments of boards and senior management, outside internationally accepted corporate governance rules, which have severely impacted procurement practices and company performance’ (National Planning Commission (NPC), 2019). Hence, it is vital that SOEs develop and maintain sound internal management in order to maximise efficiency and effectiveness, which will enable them to be commercially viable while fulfilling their non-commercial mandate (Pwc, 2015). Panicker & Manimala (2015) also found that internal weakness within organisations are the main cause of deteriorating performance.

2.3. Turnaround strategies

A turnaround is embarked upon to arrest corporate decline and to steer a company towards recovery (Arogyaswamy et al., 1995; Pretorius, 2009; Trahms et al., 2013; Reeves et al., 2015). If left unattended to, or if not attended to in good time, a decline in a company’s performance may ultimately lead to that company’s failure and bankruptcy (Arogyaswamy et al., 1995:493; Bibeault, 1999; Pretorius, 2009). Arogyaswamy et al. (1995:506) warn that, apart from potentially threatening a company’s continued existence, corporate declines lead to a company losing the support of external stakeholders like shareholders, customers and financial institutions, becoming more inefficient internally and losing some of their valued employees.

That makes it imperative to arrest and reverse a decline as soon as possible through an appropriate turnaround strategy (Pretorius, 2009; Ghazzawi, 2018). Bibeault (1999) calls this state, which requires decisive management intervention of this nature, a turnaround situation. He describes a turnaround situation as ‘an abnormal period in any company’s history’ which requires unique management approaches that are vastly different from those used during a normal period. During such a period, proven management principles routinely used during moments of stability are no longer valid (Trahms et al., 2013:1278). Pretorius (2008) warns that if nothing is done about companies that are in distress or if wrong strategies that drain resources are pursued, then a crisis develops that might see a company in its death throes.

Following their study on the strategic reorientation and turnaround of legacy airlines, Lawton et al. (2011) developed a framework for successful reorientations. The framework proposes profit maximisation, quality of service, focused leadership, staff development and communications. A focus on profit maximisation is the foundation of reorientation during periods of attempted performance recovery. Commitment to high service standards and place reliability and quality as central to their brand’s identity. Focused leadership enabled teams to adopt a clear vision that help define and embed their strategic objectives right across the company. Investment in staff development employees in the areas of technical skills, customer service and change management, the new corporate culture and management-employee relations underpins repositioning (Lawton et al., 2011). Nderu (2013) found that managerial skills, human resources management practices and working capital management are important for improved performance of the airline.

3. Research methodology

The study into SAA’s implementation of its turnaround strategy covered a five-year time frame (2015–19). The study adopted a qualitative research methodology with an interpretivist paradigm, which accepts the existence of multiple realities and the need for interaction between the enquirer and the subject of one’s study, with the researcher as ‘a passionate participant’ (Guba & Lincoln, 1994). Interpretivists believe that people attribute meaning to the world and that such meanings are socially constructed (Creswell, 2014). Purposive sampling was used to select participants to be interviewed for this study. Data were collected primarily through 37 semi-structured interviews conducted between January 2019 and November 2019. As shown in Table 3, participants included Shareholder Representatives, Board Members, members of the Top Management Team (TMT) and labour representatives. These enriched the study in a manner that makes ‘rich, thick descriptions’ (Creswell & Miller, 2000) possible.

Table 3. Participants from SAA interviewed.

Participant	Insight
8 × Shareholder Representatives	Shareholder views
12 × Senior Executives (including CEOs)	In-depth knowledge of the airline
9 × Board Members	Detailed knowledge of the airline and division of responsibilities
4 × Employee Representatives	Employees’ views
2 × Aviation Experts	Aviation industry
1 × Strategy Scholar	Strategy
1 × Long-time SAA Observer	Long-term view

Source: Own composition.

Thematic analysis was used for data analysis. In the course of conducting this study, care was taken to ensure that no harm was done to participants, that there was no invasion of privacy in any way whatsoever and no form of deception, and that there was informed consent throughout (Bryman & Bell, 2011).

4. Research findings

Participants were asked to reflect and express themselves on the constraints faced by SAA in implementing the LTTS. A few challenges emerged from the primary data collected. The challenges which emerged are captured in the form of the themes are summarised Table 4.

Table 4. Themes that emerged from the study.

Theme	Description
1	Shareholder’s slow decision making
2	Undercapitalisation
3	Unstable political leadership
4	Unhealthy board dynamics
5	Leadership instability
6	Lack of management skills

Source: Own composition.

4.1. Theme 1: Shareholder’s slow decision-making

The first theme to emerge from the interviews with participants was the Shareholder’s slow decision making. The following expressions from the participants are demonstrative of this theme. A letter ‘P’ designates different participants.

One participant remarked:

You need a shareholder who is prepared to make major, major decisions, and not run helter-skelter because of the pressure he has from other politicians. If you cannot get a Shareholder who is going to say to the other politicians ‘please give me time, don’t come here and tell me what to do’, you are going to flounder. He must be a strong Shareholder who is able to manage his own politics and not allow that politics to come and affect the organisation. (P7)

Another participant reflected:

In a competitive environment which is fast changing, it’s quite difficult for an airline to make commercial decisions when you are being treated like a post office … I think it’s a fact that SAA has never been allowed to operate as a normal commercial airline because of restrictions placed by the Shareholder. I am being brutally honest. (P16)

Yet another participant retorted:

The other challenge is you do not have agility. If we want to change a route, we have to go to the Shareholder. The Minister has 30 days within which to get back to the Board. Now in the aviation space, you cannot work with such long lead times, so that does not help at the end of the day. If you look at the cases of appointments at subsidiaries, for instance, the Shareholder must approve the CEO and the CFO. You cannot operate a normal company like that, especially a company in distress. Ultimately, the Shareholder and the Board need to make sure that a Management Team is appointed that they trust and, based on that, they can say these are the delegations that we will give you so that you can operate the organisation in an efficient manner. (P15)

Many participants agree that the tardy pace and process of decision-making at the airline is one huge factor constraining the implementation of the LTTS. The fact that the Shareholder was very tardy in making decisions and that when decisions were made, not by the CEO and his TMT and the BoD, but by the Shareholder. This runs contrary to the views in the literature that decisions must be made swiftly during a turnaround (Bibeault, 1999). O’Kane & Cunningham (2014) argued that a company’s ownership structure is likely to be a factor in the degree of autonomy enjoyed by the TMT and the BoD. Gadiesh et al. (2003) described a company’s inability ‘to move fast enough’ in its decision making as one of the biggest pitfalls in implementing a turnaround strategy. This tardiness in decision-making had the effect of undermining the efforts of the SAA TMT and the BoD to turn the airline around. Centralisation of decision making in the office of the Shareholder is contrary to what research on turnaround strategy deems to be necessary for success.

4.2. Theme 2: Under-capitalisation

SAA’s chronic under-capitalisation was another theme, which reverberated strongly throughout all the interviews. The following sentiments are reflective of the theme.

One participant stated the following.

Under-capitalisation had a massive bearing on SAA’s capital structure because the airline had huge overheads, many routes, an ageing fleet, a huge head office with different layers of decision-making, and a massive lack of domestic skills. (P21)

Another participant observed:

Had an exercise been done to establish if a stand-alone SAA would be financially sustainable, the national carrier would not have become an un-rehabilitated alcoholic that every year goes back to the Shareholder, National Treasury, and says give us more. (P4)

A participant also shared the following thought:

SAA is high gearing ratio means that the airline has to pay a premium whenever it purchases goods and services, compared to airlines with lower gearing ratios, which enjoyed better discounts. When SAA enters into negotiations with the same suppliers, because of its weak balance sheet, no discounts are forthcoming. So, at every point, you’re already starting off from a highly disadvantaged position. (P10)

SAA’s under-capitalisation was a major handicap for the airline. The literature on the implementation of turnaround strategies is clear that a turnaround strategy cannot be implemented successfully without access to adequate capital (Gadiesh et al., 2003; Onich, 2020). Bibeault (1999:112) argues that it is important to realise that, during a turnaround, ‘more than at any other time in the corporate life span, “cash is king”’. Gadiesh et al. (2003) state that ensuring that a company is properly capitalised ‘is the first order in corporate turnarounds’, while Bibeault (1999:208) posits that access to finance is one of the three key elements of a turnaround strategy, without which ‘a company’s viability is in serious doubt’. Onich (2020) cautions that even the best strategy with the best TMT and motivated employees ‘will fail without adequate resources’.

4.3. Theme 3: Unstable political leadership

Unstable political leadership came through as another theme:

A participant expressed himself as follows:

The problem with the ANC is that even at its best form, when a Minister is changed, when the next Minister comes in it is as if he is from another party. Now, you can see that flowing through to SOCs. All of a sudden, you have a position where people are not sure about whether they should trust you or not. The styles are very different. (P9)

One participant expressed similar sentiments as follows:

The tragedy for me is these stop-starts, stop-starts in government, where there is no continuity, where each Minister that comes into a portfolio feels compelled to re-invent the wheel and start afresh, whereas in other parts of the world, like in the private sector, when you come in as a new CEO, the first thing you ask yourself is: what’s the current strategy? (P4)

A participant added his views this way:

You see, I would say I am on the fourth Minister within a 12-month period, and I guess it’s the nature of politics. When you change Ministers, it is painful because each Minister has a view, and you need to allow him to test your logic and you find each other around the strategy. When you change Ministries (from National Treasury as Shareholder to the Ministry of Public Enterprises), it is even worse because you change administrators plus the politicians, so we have a double problem. (P9)

Another participant strongly reflected:

The biggest problem, I think, for SAA has been the Shareholder, and the reason why you have had the turnaround strategies not succeeding has been that the Shareholder lacks vision, continuity and persistence. Therefore, in the middle of implementing one turnaround strategy, you change everything, and the people who come in are not given an instruction to pursue the reform. Instead, they come in and they are told: change everything. (P21)

Santana et al. (2019) acknowledge the possibility that ‘national institutions’ like governments may exert enormous pressure on companies’ strategies, which may have the effect of constraining or delaying a turnaround. They envisage ‘coercive pressure’ being exerted either directly from a government or in the form of legislation. Paton & Mordaunt (2004:216) cautioned that political pressure would make it difficult for those running a public-service organisation to make rational business decisions during a turnaround process. They warned that ‘the multi-level and embedded nature of governance’ in such entities means that failure may be attributable to a number of causes.

4.4. Theme 4: Unhealthy board dynamics

Another theme, which came out strongly, was unhealthy board dynamics within SAA. In this regard, a participant made the following observation:

I realised that there is politics here; maybe I came to the wrong place. It was then that I realised that this thing is actually much bigger than I had anticipated in terms of the dynamics. In fact, one of the things that I thought let the turnaround strategy down is that many people seemed to have come to the Board with mandates from all and sundry, maybe from the private sector and others from this section of the ruling party. Some of us did not get those e-mails, so we got there to say what I can do to put my best foot forward. It’s not clear to me what exactly the mandates were, but I could see there were people there who came with mandates – just the way they behaved and their mannerisms, what they prioritised and what they did not prioritise clearly showed me that this one came with a particular mandate. That, basically, troubled me a lot. (P6)

Another participant remarked:

I would say that short of the entire Board being replaced, there has to be a culling and a re-appointment of other members. I think we need to have the right skills in place, people who really bring aviation knowledge into the scheme of things and all the other aspects that one needs to complement a Board with the diverse skills that are required. I think we need Shareholder intervention. (P2)

Another participant made the following remarks:

You do not need a professional Board Member who sits on a number of Boards because he will not have the time to devote to the airline. You need a Board that has perspective, a Board that is able to deal with people. You also need a Board that understands organisational dynamics so that if a union shouts, you are not going to jump and think the world is going to fall over because a union is threatening to go on a strike. (P7)

Bibeault (1999:161) states that, to improve the chances of having a turnaround strategy implemented successfully, it is important for the BoD to delegate full authority to the CEO and to support him. Trahms et al. (2013:1291) warn that, given its composition and vigilance or lack thereof, a BoD may be an impediment to or facilitate the successful implementation of a turnaround. The unhealthy dynamics within the SAA Board ran contrary to what is expected in terms of good corporate governance and compounded the airline’s challenges. This is consistent with the view of the Institute of Directors in South Africa (IoDSA) (2019), which posits that the SOE Boards in South Africa face challenges such as the absence of ‘clear lines of accountability amongst the various levels of governance role players’. Another challenge, according to the IoDSA (2019), is that the Shareholder often makes appointments to the TMT or the Board ‘without due consideration for their skills, experience or independence’. The IoDSA (2019) contends that the Government is often guilty of abusing its position as a sole Shareholder to influence Boards in a manner that is not possible for private sector Shareholders.

4.5. Theme 5: Leadership instability

Another theme that emerged very strongly from the study was the influence of leadership instability on the implementation of the LTTS.

A participant expressed himself as follows:

Had we been more thoughtful about SAA in the last 25 years, we would have produced at least four CEOs who know how to run a profitable SAA and when Kenya Airways and Ethiopian Airlines are looking for a CEO, they would have found it very easy to come and recruit from South Africa. Where we are now, unfortunately there has not been a single CEO of SAA that has completed a five-year term – not even one since we became free. In fact, it is as ridiculous as having had 12 CEOs in 10 years. (P4)

Another indicated the following:

After a while, you are turning around, losing balance and falling. Now we have all of these employees who really are doing their best to ensure that the company is afloat. They are doing their best to ensure that the strategy is implemented, but because of the fatigue that I’m talking about, you find that it’s hard for people to really give it their best shot. I’ll use the analogy made by the current Chairperson, who said that when you are the actor in the position that I was acting in, you are like a castrated man. There is nothing you can do. (P14)

Yet another participant observed:

The challenge is frequent Management changes. How we can deal with that is through insulating Management from the political aspect. When the President appoints a new Minister of Public Enterprises, we need to insulate the entities to say that the Ministers cannot come and change Management. There must be triggers for that, and one of them is this: why fix it if it is not broken? That is the first thing: insulation from political interference. It cannot just be that you come and you change [the CEO]. The triggers should be all of those things. If they are achieving their targets, you don’t come and change the strategy of the company; you don’t come and change the Shareholder Compact. Instead, you do your political oversight. (P29)

There is consensus in the literature that changing the CEO and the TMT during a turnaround is necessary when the cause of the decline is related to internal factors. There is also agreement that such changes should be made early on in a turnaround process (Chowdhury, 2002; Gadiesh et al., 2003; Schoenberg et al., 2013; Gotteiner et al., 2019). Once the initial changes in the TMT have been made, organisational stability is vital. However, once appointed, a turnaround leader becomes both ‘the architect’ and the ‘implementer of [the turnaround] strategy’ who must champion it enthusiastically and even aggressively within the company and ensure that the desired results are achieved. It is imperative that such a turnaround leader, who must make ‘bold, decisive moves quickly’, has ‘full authority delegated to him/her by the Board’ (Bibeault, 1999). It is only when a turnaround CEO is in charge during the full period of the implementation of the strategy that he/she can be the ‘implementer of the strategy’ and rally employees to work towards the achievement of the turnaround.

4.6. Theme 6: Lack of management skills

Finally yet importantly was the emergence of the theme on the lack of management skills at the airline. To that end, participants shared the following sentiments:

A participant mentioned the following

It seems like people have left here, people who could make things work; they are gone. You’ve got good people remaining, who have good hearts. They like the brand, but some of them don’t have the requisite skills to make the turnaround work. So, skills are key. (P9)

The same participant added:

Forget normal retail and customer engagement; customer experience management, we are still rebuilding it from a pure strategy and leadership point of view. We have a gap of skills. If you do not have senior leadership teams who have seen the bigger picture, you will not succeed in turning the business around. Problem number one is that the brand is not selling, so you cannot get somebody from the bank or from another airline to come here. SAA is not an employer brand. It is damaged, with all the history of instability. We have tried to bring younger people from brands like Unilever, very strong people who are Executives. They would like the challenge of the turnaround, but they cannot stomach the uncertainty about the future because this thing is known to be unstable. (P9)

Another participant observed:

We have limited expertise. The challenge is that people do not want to come and work for SAA, especially since SAA is in the news every day, with reports stating that we do not have money. People say: why must I go there? You will find people who say, okay, I want to be part of this journey, but there are not many of them around. People like myself: I am at the end of my career. The only thing I can lose is my reputation now, which I try not to lose by doing the right thing at the end of the end. If you do not put the investment in, you are not going to get the right people. (P15)

Given Bibeault’s (1999:361) characterisation of a corporate turnaround as ‘a management challenge of the highest order’ which requires unique approaches, it follows that top skills are needed to manage a turnaround process. Bibeault (1999:2) states that seeking to arrest and reverse a corporate decline is far more challenging than running a stable company. Therefore, having a competent TMT and motivated employees during a turnaround is crucial. Chowdhury (2002) contends that among the factors which make a big difference during a turnaround process are the CEO’s management style, the leadership quality of the TMT, as well as the ‘actions, characteristics and skills of the employees’, and Gadiesh et al. (2003) emphasise that a strong management team is vital for a successful turnaround.

5. Discussion and conclusion

The aim of this article was to explore some constraints experienced by SAA in the implementation of its LTTS. These constraints were identified as shareholder’s slow decision-making, undercapitalisation of the airline, unstable political leadership, unhealthy board dynamics, leadership instability, and lack of management skills. The first four constraints identified are, in effect, governance-related while the last two are management-related. To the extent that this study revealed considerable governance-related problems between the TMT, the Board and the Shareholder, it has built on previous studies (Dimopoulos & Wagner, 2016; Hopkins, 2008; O’Kane & Cunningham, 2014).

This study has been valuable in that it has brought in the rare voice of emerging markets and economies to the discourse of turnaround strategies. Although the study focused on SAA, the lessons learned apply to some extent on other SOEs due to similar governance models. SAA’s experience, then, gives rise to what this paper posits as the anxious principal theory, which is the converse of agency theory. This alternative, anxious principal theory stresses the importance of a company’s Shareholders having faith in and working in tandem with their appointed BoD and the TMT, rather than against them. The more anxious the principal is, for whatever reason, the likelier he or she is to over-reach and to interfere in strategic or even operational decision making or, where decision making vests in the Shareholder, as in the case of SAA, not to make decisions promptly. In the process, the company suffers from paralysis in decision-making. Although this paper did not discuss the role of the BoD per se, it does not follow that members of the airline’s BoDs conducted themselves as stewards. This requirement had a debilitating effect on the airline. Not only were the BoD, the CEO and TMT disempowered, in an intensely competitive industry, which requires agility. The fact that Shareholder Ministers changed frequently and that they often took long to revert to the SAA BoD with decisions (if they made them at all) meant that the Shareholder did not always act in the best interests of the airline.

Whereas the agency theory anticipated that, unless appropriately incentivised, agents would advance their own selfish interests instead of those of the company, in the case of SAA the study found that it was the Shareholder who unwittingly acted against the best interests of the airline, thus making it impossible for the TMT to implement the turnaround strategy. The study has also shown that for SOEs to improve their performance and enhance the delivery of public services, it is imperative that they clarify their commercial and non-commercial mandates, and that government needs to lean more towards managing them along commercial lines. The study further recommends that if South Africa wants SOEs in general and SAA in particular to fulfil its commercial and non-commercial mandate efficiently and effectively, government needs to reconfigure and improve its decision making process, and capitalise the airline adequately. Furthermore, as a shareholder government needs to follow good governance principles, which principles will go a long way in improving the political stability, which should improve the board’s relational dynamics and executive leadership stability. Finally, the airline should recruit suitably qualified executives with the requisite skills and expertise in the aviation industry.

Disclosure statement

No potential conflict of interest was reported by the author(s).