Connect with us

Entrepreneur Profiles

1Time Airlines: Rodney James

The founders of SA’s other low-cost airline raised R10 million, made a website, leased a plane and built a no frills carrier that now has 15% market share and a turnover of R1,3 billion.

Monique Verduyn

Published

on

Rodney James

For an airplane to fly, it engages in a constant tug of war between the opposing forces of lift versus weight and thrust versus drag. The might of such strong energies at odds with each another is something that Rodney James, founder and CEO of JSE-listed 1time airlines knows a lot about. Audacious and, some might say, downright defiant, he had the nerve to start a budget airline in 2004, pitting it against Kulula, which had taken to the skies three years earlier and held the market firmly in its grasp.

James, who qualified as an aircraft engineer and had owned his own aircraft maintenance company since his late 20s, had friends in the right places. One of his former partners, Glenn Orsmond, had joined Comair and was employed as Kulula’s financial director. He and James met regularly at their local to chat over a beer or two and it was there that they hatched their plan for a new and what James calls a “true” low-cost airline.

“Glenn had been involved in the launch of Kulula which had been going for about 18 months when we started chatting about our own idea for an airline,” says James. “I was in the maintenance business, but I wanted to grow the company — Aeronexus Technical — and the only way to do that was to create our own airline. So I said to Glenn, c’mon let’s do it. I taunted him about Kulula because they were pricing themselves at about 15% below the premium airlines, which is not low-cost in my view.

“We had a good laugh, but we agreed on two things: South African passengers needed to pay less to fly, and Aeronexus was a really great platform from which to launch a new airline. We had years of experience and a great reputation in maintenance. In this industry, safety records and quality are critical, and we had that pinned down. After about three months, I convinced Glenn to say yes. When he informed his employers he was leaving, they told him to pack up his stuff and go. He came to my door and said ‘I need an office’.

I didn’t have one for him, so he sat across from me at my desk and wrote the business plan.”

For an airplane to fly, it engages in a constant tug of war between the opposing forces of lift versus weight and thrust versus drag. The might of such strong energies at odds with each another is something that Rodney James, founder and CEO of JSE-listed 1time airlines knows a lot about. Audacious and, some might say, downright defiant, he had the nerve to start a budget airline in 2004, pitting it against Kulula, which had taken to the skies three years earlier and held the market firmly in its grasp.

James, who qualified as an aircraft engineer and had owned his own aircraft maintenance company since his late 20s, had friends in the right places. One of his former partners, Glenn Orsmond, had joined Comair and was employed as Kulula’s financial director. He and James met regularly at their local to chat over a beer or two and it was there that they hatched their plan for a new and what James calls a “true” low-cost airline.

“Glenn had been involved in the launch of Kulula which had been going for about 18 months when we started chatting about our own idea for an airline,” says James. “I was in the maintenance business, but I wanted to grow the company — Aeronexus Technical — and the only way to do that was to create our own airline. So I said to Glenn, c’mon let’s do it. I taunted him about Kulula because they were pricing themselves at about 15% below the premium airlines, which is not low-cost in my view.

“We had a good laugh, but we agreed on two things: South African passengers needed to pay less to fly, and Aeronexus was a really great platform from which to launch a new airline. We had years of experience and a great reputation in maintenance. In this industry, safety records and quality are critical, and we had that pinned down. After about three months, I convinced Glenn to say yes. When he informed his employers he was leaving, they told him to pack up his stuff and go. He came to my door and said ‘I need an office’.

I didn’t have one for him, so he sat across from me at my desk and wrote the business plan.”

Behind the scenes

How do you launch an airline post 9/11 and make it fly? Worldwide, the airline industry lost $24,3 billion from 2001 to 2002. The September 11 catastrophe hit really hard, but it also opened the door for airlines to accelerate the restructuring that was so badly needed in an already chaotic sector. For 1time, the streamlining that took place was great. There were aircraft available at really good prices and that’s how they could afford to get started.

Although the reality is that the airline industry is extremely price sensitive, regular 1time passengers have told James that they don’t choose the carrier based on price alone. “Our marketing budget is typically a third of that of our competitors, but we’ve put a huge amount of effort into the product itself, hence ‘more nice, less price’. We really spend a lot of money on the ‘more nice’ thing because word of mouth is powerful. As people started flying 1time, the message got out there — there’s decent leg room, leather seats and incredible airfares. It didn’t matter what our competitors were saying, passengers were saying ‘try them’. There’s nothing as powerful as that.”

He cautions that it doesn’t matter how good you think you are, you always have to be critical about your business. In 2010, he and the directors went on a road show that got them on their planes and out talking to staff. “We were critical about everything and put in place plans to address problems. When you are too familiar with an environment, you don’t always notice that the paint is fading or the seats are scuffed. It’s vital to keep a critical eye on the business. Always look at things as if you were the customer. What would you take in?”

1time also employs a bunch of yield managers who sit on their computers like commodity traders. “If we’re not selling airfares quickly enough, we bring down the prices; if you’re selling too quickly, you’re too cheap so you need to bring in a few higher priced fares. This process is a big part of the low-cost business model and enables us to manage demand better in such a seasonal industry.”

Surviving in a cut-throat industry

Competition between the budget airlines has not let up and it remains ferocious. “It’s dirty and ugly out there,” says James. “We don’t like each other and we don’t talk to each other, even though some people think we do.  I think our competitors are kicking themselves because maybe they could have taken us out of the market when we had one aeroplane, but now it’s impossible because we‘re on all their routes. We’ve been the fastest growing airline in this market for seven years running.”

James and his team fly on the competitors every now and then just to see what they’re doing. “We don’t spend as much time watching them as they do watching us though,” he laughs. “I reckon some of them have a 1time internal department that monitors us constantly.”

But not even the launch of SAA’s budget offering Mango in 2006 put a dent in 1time’s upward spiral. Probably because it was largely SAA passengers who switched to Mango, according to James.

“We’ve proven that paying a fortune to fly just does not make sense,” James says. “There are still people out there who get their companies to pay for them to fly certain airlines so they can collect frequent flier miles, but companies are catching on and putting a stop to that. That’s great for us of course. We now have a sales team that targets FDs and CEOs. We get them to look at their spend on travel and show them how they can bring that right down.

“Then there’s the food question. We don’t make much on the food we sell onboard, but we took away a huge cost, and that’s the big thing. We carry two million passengers a year now. For a really lousy airline meal in a cardboard box, you’re probably paying about R80. Times that by two million and you get a R160 million saving per year. So who cares if we’re making a small profit on food when we are saving that much?”

How an idea becomes reality

James recalls that there was never really a great vision to build a big airline. “In fact, the plan was to get four aeroplanes and maybe one extra spare. That would have given us a nice size operation. The big question now is when are we going to take a year off and build a big cash reserve? We just haven’t done that yet.”

That’s a big challenge for entrepreneurs. It’s difficult to turn down growth but it’s also really tricky to manage. Yet it’s one of the other things that 1time got right. “The banks do not lend money to airlines,” says James. “In our first year we carried 375 000 passengers. Last year we carried about two million passengers and the group turnover with the maintenance business was R1,3 billion. That growth has been funded through working capital.”

Things became a little hairy in 2008 when the downturn strangled the economy. With oil at $150 a barrel and the rand at nine to the dollar, 1time assumed the brace position. But then a remarkable thing happened. The recession moved a huge corporate market off the premium class carriers onto cheaper flights. “It was an amazing shift,” says James. “Many companies and airlines went under. Yet there we were gaining market share because business people still needed to fly. Those people have never moved back and we have just continued to grow.”

To put 1time’s achievements into perspective, 200 airlines around the world shut down as a result of the financial crisis, including another low-cost South African carrier, Nationwide Airlines, which was grounded by the Civil Aviation Authority after an engine fell off one of its planes on departure from Cape Town in November 2007. The 30% increase in fuel costs and a sharp decline in passenger numbers closed the airline down in April 2008.

Mr Nice Guy

Finding good people is a challenge in any business, but nowhere is it more so than in customer-centric companies like an airline that’s growing fast. “It’s always hard. We have an employment process that begins with an initial screening. A director and two managers do a 10-minute vetting with the candidate, just to chat and pick up on their personalities. We’re in the service industry, so we have to employ people who enjoy being servants.”

As a leader, James is fairly relaxed. “Some people mistake my softness for weakness, but I like to be soft on people and strong on standards.  In this industry, keep the standards up and we’re all good. I find that you get a lot more out of people if you just let them manage themselves. I’m also lucky that I’m calm by nature.”

His advice to entrepreneurs? Trust your instincts and back yourself. We’re probably the only creatures on earth who don’t, he says. “Once you’ve made a decision to do something, go for it.  Put all the basics in place right upfront and get all that ugly admin work done. That will keep you on top of every situation. And if you have the right attitude, you can do anything. It doesn’t really matter how hectic it is.”

Stat

10 000: The number of passengers 1time had carried 20 days after launching

R20 million: After tax profits in 2006

12%: Growth in passenger numbers in 2009, despite a contracted market

R1,3 billion: Group turnover in 2010

13: The number of planes in the fleet, making 250 flights per week on domestic routes

2 million: Number of passengers in 2010, about 160 000 per month

The sky’s the limit

1time Holdings listed on the JSE’s Altx in August 2007, raising R30 million and using the funds to buy more aircraft and expand its businesses. The aviation group has a healthy mix of income and it shows. After tax profits for the year to December 2006 were more than R20 million. As a listed company its net profit before tax increased by 30% in the first six months after listing, from R12,5 million the previous year to R16,3 million. Growth was achieved on the back of a 36% spike in revenue from R222 million to R302 million in those six months. Headline earnings per share (EPS) increased by 91% from 3,5 cents per share to 6,7 cents. By 2009,  headline earnings were R82,6 million, and revenue R1,25 billion — a growth of 19% on the previous year. Headline EPS was 39,35 cents. Passenger numbers grew at 12%

Monique Verduyn is a freelance writer. She has more than 12 years’ experience in writing for the corporate, SME, IT and entertainment sectors, and has interviewed many of South Africa’s most prominent business leaders and thinkers. Find her on Google+.

Advertisement
Comments

Entrepreneur Profiles

10 SA Entrepreneurs Who Built Their Businesses From Nothing

Remarkable stories about local entrepreneurs who built big businesses and well known brands up from humble beginnings.

Nadine Todd

Published

on

Lebo Gunguluza

Ryan Bacher

NetFlorist, SA’s largest online gifting company, was launched by accident

ryan-bacher

Ryan Bacher

“Our plan was to run the site for one day to prove that we could do it. And then we got R30 000 worth of orders. That was the equivalent of a whole month’s revenue at a flower shop.”

Ryan Bacher, Lawrence Brick and Jonathan Hackner; launched NetFlorist on Valentine’s day in 1999.

The founders of NetFlorist had no intention of starting an online floral and gifting company – they just wanted to prove to Makro that they could design and run an e-commerce site. But Valentine’s day came and went, and the ‘test’ site did unbelievably well, so they didn’t shut it off.

“What’s really crazy is that people were paying for us to provide a service. We had no stock and knew nothing about flowers. We just sent the orders to a flower shop in Sandton,” says Ryan Bacher.

How did they make it work? “We knew our best bet was to get the website out, hack it, and keep changing it. We would learn more from the site being out there in the market than we could ever learn in-house, trying to develop a perfect product. It was basically always a work in progress.”

Continue Reading

Entrepreneur Profiles

From Silicon Valley To SA: How Online Marketplace for Developers OfferZen Was Born

OfferZen was conceived in Silicon Valley but launched in Cape Town. The company founders discuss the advantages (and disadvantages) of starting a tech business in South Africa.

GG van Rooyen

Published

on

Philip and Malan Joubert of OfferZen

Vital stats

  • Players: Philip and Malan Joubert
  • Company: OfferZen
  • Established: 2015
  • Visit: www.offerzen.com
  • About: OfferZen is a curated online marketplace for software development talent. It has over 500 companies since it launched, including big industry names like Barclays, GetSmarter, Takealot, FNB, Superbalist, Allan Gray, and 24.com. Founders Malan and Philip Joubert have been included in Quartz Africa’s annual Africa Innovators list for 2017. The list features 30 of Africa’s leaders in technology, business, arts, science, agriculture, design and media.

As soon as they graduated from university, brothers Philip and Malan Joubert entered the start-up scene. Their first business, FireID, met a rather swift and ignominious end, but they kept the name and launched an incubator under the same moniker in Stellenbosch.

This endeavour was far more successful, helping to launch local start-ups like SnapScan and JourneyApps. Soon, a few of the businesses in their incubator were scaling and in need of funding, so the Jouberts relocated (with the start-ups) to Silicon Valley.

While living in the world’s most famous tech hub, the idea for OfferZen was born.

1How did you get the idea for OfferZen?

We enjoyed running the incubator, but we also knew that we loved start-up life and wanted to launch our own business. We identified education and recruitment as two areas where a tech start-up could be particularly successful and have a real impact.

Related: Meet The 40 Richest Self-Made Entrepreneurs On Earth

We settled on developer recruitment because of how skewed that marketplace is. Companies are so desperate for good developers, that they get spammed constantly on sites like LinkedIn.

We decided to create a site where developers could upload their details and companies would approach them — the opposite of your typical job or recruitment site.

2Why launch in South Africa instead of Silicon Valley?

We knew the South African recruitment market well, so we felt more confident launching locally. Also, South Africa is home to some great developers, as well as many large companies in need of their services, so we knew that a market existed for what we were doing.

Another big reason was the fact that we could bootstrap this business in South Africa, while we would have needed to raise funds if we wanted to operate in Silicon Valley.

Living and operating there is extremely expensive, so you need a lot of runway. There’s also a lot more competition, so you need big names and big money behind you.

3Is visiting a place like Silicon Valley worthwhile if you want to launch a tech business in South Africa?

It is definitely worth it. There is an unbelievable concentration of talent and expertise in Silicon Valley, and people are very willing to speak to you. While we were there and preparing to launch OfferZen, we spoke to countless similar recruitment businesses.

Figuring out what could be handled via software/computers versus what we would need people for was one of our major questions, and it was great to discuss this with experts on the ground. So, yes visiting Silicon Valley can be very useful, but you should be working on a specific project.

People there don’t mind engaging with you, but they want to address specific issues and challenges. They don’t want to chat in general. If you’re not actually busy working on a business, you won’t find it as useful.

Related: Edward Moshole Founder Of Chem-Fresh Started With R68 And Turned It Into A R25 Million Business

4How did you manage to attract enough developers and companies to create a viable marketplace?

It really is a chicken/egg situation. You need a bunch of companies on the site to attract developers, and you need developers to attract companies, so how do you build up your database to a point where the whole thing becomes viable? That was one of the biggest challenges we had.

Our advantage, though, was that good developers are so sought after. Companies are desperate to find developers, so they were quite keen to support what OfferZen was doing and join the marketplace. We started by building up a solid database of companies, and then started signing up developers.

Once we had the companies, it was easier to convince the developers. We also offer developers who find employment through OfferZen a R5 000 bonus. Importantly, we started off quite small. Initially we just focused on Cape Town and created a viable marketplace there.

Once that was up and running, we expanded to Johannesburg. If we threw the net too wide, we ran the risk of not having enough developers and companies in one place.

5You have a very impressive developer-centric blog on your site. Why the focus on the blog?

We realise that only a small portion of developers are actively searching for a job at any given time, so we wanted to create something that would allow us to engage and offer something useful to the rest.

Ultimately, we want all developers to be aware of OfferZen and its website, and a great way to do this is to generate useful content that drives traffic to the site. But we don’t think this would work if the whole exercise was just a thinly-veiled marketing exercise.

So, we decided to create genuinely useful content that would interest local tech entrepreneurs and developers. Creating this kind of content takes time and money, but we believe it’s worth it.

6You’ve grown massively over the last twelve months, from five people to more than 20. How do you make good hires when having to fill roles that quickly?

We’ve posted an article on our blog where we go into the minute details of our hiring process, which people can read, but I would add that people should seek out the book Who: Solve Your #1 Problem by Geoff Smart. It’s a fantastic book on the hiring process.

Another thing worth mentioning, which OfferZen does, is to have what we call ‘simulation days’, where a candidate comes in and does actual work for a few days. It requires time and energy from the rest of the team, and it is also risky, since the candidate is doing real work and interacting with real clients, but we find that it’s an excellent way to gauge capability and culture fit.

Continue Reading

Entrepreneur Profiles

Gareth Cliff Shares His Tips For Starting Your Very Own Podcast

Here are Gareth Cliff’s tips for starting your very own podcast.

GG van Rooyen

Published

on

gareth-cliff

Well-known South African DJ Gareth Cliff left radio a few years ago to start his own podcasting company, CliffCentral. The company celebrated its third birthday in May of 2017, and has shown steady growth, both in terms of content and listeners. CliffCentral has definitely shown that there is a South African market for this new medium.

Here are Gareth Cliff’s tips for starting your very own podcast.

1How easy is it to start a podcast if you don’t have a large team/company behind you?

Anyone can start a podcast. You don’t need staff, a studio or expensive equipment. The hard part is delivering quality content and being consistent.

Related: When Gareth Cliff Met Bill Draper – The First Skype Funder

2What advice do you have for people looking to start a podcast? What are some of the dos and dont’s?

What can you do that nobody else can, or what can you do better than anyone else? That would be the start of the content plan for the podcast. Also, be prepared to grow the audience slowly. Building a solid listenership takes time. It isn’t something that happens quickly.

3More and more companies (like Dell and McAfee) are launching branded podcasts. What do you think of this as a content marketing strategy?

We think it’s terrific, as long as it’s relevant and interesting. Take a listen to what Gimlet Creative are doing for Microsoft and Virgin Atlantic. They’re not ads, they’re great to listen to. AutoCentral on CliffCentral is our motoring show, hosted by the guys from AutoTrader — and it’s really good, because they are so passionate about cars. T-Systems also host their own podcast during which they interview ‘disrupters’ in the industry.

4What does the local landscape look like? How is the local popularity of podcasting growing? Do you need to aim your content at an international audience?

Local service providers have told us that podcasting in South Africa doubled from 2014 to 2016 and keeps growing incrementally. In the US, podcasting has increased by 70% year on year for the last three years. That makes it the fastest growing medium of all. Our audiences are local and international. They choose us, we don’t target them.

Related: Celebrity Jen Su On Building Your Brand

5What is it about podcasting that you think sets it apart from other channels/mediums? What are its strengths, and what are its weaknesses?

Podcasting is replacing long-form journalism. People don’t have time to read reams of stuff. You can listen to a podcast while you’re driving, cooking or training. Also, mainstream media try to be everything to everyone. As Dion Chang recently told me in an interview, individuality is the way of the future — and niched content will become much more sought after than bland content crafted to appeal to the masses.

6What are some of the challenges of doing a regular podcast that people don’t tend to think of starting out?

Keeping content fresh, unique and relevant. That sounds easy, but it’s hard to consistently up your game and keep delivering. Listening to podcasts is an active choice — people don’t stumble upon them like you stumble upon a music radio show. That means the audience are discerning; they understand all the choices they have.

Continue Reading
Advertisement

SPOTLIGHT

Advertisement

Follow Us

Advertisement

Trending

FREE E-BOOK: How to Build an Entrepreneurial Mindset

Sign up now for Entrepreneur's Daily Newsletters to Download​​