SA's Virgin boss eager to fly on the wings of diversity
'I didn't want to leave South Africa, so I resigned, but also let Virgin Atlantic know that I was in the market'
VIRGIN ATLANTIC Airways is dead keen to take a share in Sun Air, but may have to bring pressure to bear on the government to increase the stake foreign carriers are permitted to take in domestic airlines.
Existing legislation allows for foreign airlines to own 25% of SA-registered carriers, but David James, Virgin's general manager for Southern Africa, hopes the government may soon increase this to 35%.
"It is not easy to run an airline when you have only a quarter share. However, with a 35% stake and black consortium partners - we have already had talks with some - taking between 16% and 20%, we would have a reasonable degree of managerial control."
Virgin would use Sun Air to gain a strong strategic position in Southern Africa and establish a platform to extend its interests into the rest of Africa - A Pan African carrier has not been discounted.
Would Sun Air retain its identity? "It is a question of which brand is of the most value and without doubt it has to be Virgin's," says James.
Virgin, after just two months of operation, seems to be doing well. James says load factors are holding at 90% for economy class and 75%-80% for Upper Class, but he believes the airline will for some time to come be No 3 in terms of capacity on the UK-SA route. "Our problem is that until the Department of Transport changes its stance on capping frequencies from the UK to 24 a week Virgin will never get more than seven as opposed to BA's 17 and SAA's 13 frequencies."
But that doesn't mean Virgin won't be increasing capacity, he says. "At the moment we are using Airbus A340s on the route, but as demand increases we will introduce higher capacity Boeing 747-400s."
James, who denies he was head-hunted by Virgin, was general manager for British Airways for 15 months until a top management reshuffle looked like he might have to return to the UK. "I didn't want to leave South Africa, so I resigned, but also let Virgin Atlantic know that I was in the market. I got the job."
He believes that the falling value of the rand against sterling will see air fares rise. "Yields are falling, but for the next three to six months fares will remain unchanged. After that you can expect to see increases of 5%-10%. We are a lower-cost airline with less capacity than BA and SAA so we can absorb the low yields for longer than our competitors."
The falling exchange rate has also not affected the number of tourists travelling to the UK. "The SA market is very resilient and always bounces back. But we will also see an emerging black middle class taking up the slack and overtaking the white middle class which could see the market grow substantially in the years to come."
Voted the top airline for in-flight entertainment for 1996, Virgin is not resting on its laurels - masseuses and manicurists aside. Virgin boss Richard Branson wants to introduce sleeping quarters on his flights - a move that is designed to better BA's fold-out flat bed which it offers its first-class passengers.
Passengers, who will pay extra for the rooms because of the cargo penalties, will be able to walk down into the cargo area where paletised cabins will have been installed in one or two-bed configurations. The rooms would be completely private, much like a hotel room.
And what are Branson's plans for expansion in SA? James is enthusiastic. "That's what I love about this job. There are so many dimensions and innovations, we are not just an airline."
On the cards, besides the Virgin Mega Store which will open within a year, are Virgin financial services, Virgin Cola, vodka and jeans.
Branson, who is not involved in the UK lottery, also wants to run SA's national lottery - on a non-profit basis. "Negotiations", says James, "are at an early stage, but Virgin has the expertise and the flair to make it successful."