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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

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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+.

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1 Comment

  1. Eran Eyal

    Jul 5, 2012 at 18:42

    Exceptional!!!!

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Entrepreneur Profiles

6 Lesson Gems From Appanna Ganapathy That Helped Him Launch A High-Growth Start-Up

Twenty years after first wanting to own a business, Appanna Ganapathy launched ART Technologies, a business he aims to grow throughout Africa, starting with Kenya thanks to a recently signed deal with Seacom. As a high-growth entrepreneur with big plans, Appanna spent two decades laying the foundations of success — and now he’s starting to collect.

Nadine Todd

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Vital Stats

Like many entrepreneurs before him, Appanna Ganapathy hadn’t even finished school and he was already thinking about his first business venture. A friend could secure the licensing rights to open Nando’s franchises in Mozambique, and they were very keen on the idea — which Appanna’s mom quickly dampened. “You can do whatever you want,” she said. “As long as you finish your degree first.”

Unlike many other entrepreneurs however, Appanna not only finished his degree, but realised that he had a lot of skills he needed to develop and lessons to learn before he’d be ready to launch the business he wanted.

“We launched ART Technologies just over two years ago. If I had started any earlier, I don’t think I would have been as successful as I am now,” he says.

Here are six key lessons that Appanna has learnt along his journey, which have allowed him to launch a high-growth start-up that is positioned to make an impact across Africa.

1. You don’t just need a product – you need clients as well

Business success is the ability to design and execute a great product and solution, and then be able to sell it. Without sales, there is no business. This is a lesson Appanna learnt while he was still at university.

“I was drawn to computers. I loved figuring out how they worked, playing computer games — everything about them,” he says. “My parents lived in Mozambique, and during my holidays I’d visit them and a friend who had a computer business. I helped him assemble them and thought I could do this too while I was studying. I convinced my dad to buy me a car so that I could set up my business — and never sold or assembled a single computer. I delivered pizzas instead.”

So, what went wrong? The simple truth was that at the time Appanna had the technical skills to build computers, but he lacked the ability to sell his product.

“If someone had said, ‘I’ve got an order for 30 computers’, I would have filled it — but to go out and get that order — I didn’t really even know where to start.”

2. Price and solution go hand-in-hand

As much as you need the ability to sell your solution, you also need a market that wants and needs what you’re offering, at a price point that works for everyone.

In 2007, Appanna was approached by a former supplier whom he had worked with while he was based in Mozambique. The supplier had an IT firm and he wanted to expand into South Africa. He was looking for a local partner who would purchase equity shares in the company and run the South African business.

“I loved the opportunity. This was something I could build from the ground up, in an area I understood well,” says Appanna. The firm set up and managed IT infrastructure for SMEs. The value proposition was simple: “We could offer SMEs a service that they could use for a relatively low cost, but that gave them everything an enterprise would have.”

The problem was that although Appanna and his team knew they had a great product, they were competing on price with inferior products. “If we couldn’t adequately unpack the value of our solution, an SME would choose the cheaper option. It was a big lesson for me to learn. It doesn’t matter how good the solution is that you’re offering — if it’s not at a price point that your target market accepts, they won’t choose you.”

It was this understanding that helped Appanna and his team develop the Desktop-as-a-Service solution that ART Technologies now offers the SME market.

“While I was developing the idea and the solution, I needed to take three key things into account: What do SMEs need from an IT infrastructure perspective, what is the most cost-effective way to offer them that solution, and what will the market pay (and is it enough to cover our costs and give us a small profit margin)?”

Appanna’s experience in the market had already taught him how cost-conscious SMEs are, and so he started developing a solution that could deliver value at a price point SMEs could accept. His solution? A unique Desktop-as-a-Service product that combines all the processing power and Microsoft products a business needs, without any capex outlay for servers or software.

“It’s a Cloud workstation that turns any device into a full Windows computer,” Appanna explains. “We hold the licences, and our clients just access our service. A set-up that would cost between R180 000 and R200 000 for 15 users is now available for R479 per user per month.”

It took Appanna and his partners time to build the solution, but they started with the price point in mind, which meant a solution could be designed that met their needs as well as the needs of the market.

“Too many businesses set everything up, invest in the solution, and then discover they can’t sell their product at the price point they need. My time in the market selling IT and infrastructure solutions gave me invaluable insights into what we needed to deliver on, and what we could realistically charge for our service.”

3. Get as much on-the-ground experience as you can

appanna-ganapathy-art-technologies

The time that Appanna spent building the IT firm he was a part-owner of was invaluable. “I started as a technical director before being promoted to GM and running the company for three and a half years. Those years were very, very important for me. They’re where I learnt everything about running a business.

“When I started, I was responsible for sales, but I didn’t have to actually go out and find clients, I just had to meet them, compile quotes and handle the installations. Everything I did was under the guidance of the company’s CEO, who was based in Mozambique. Being the guy who did everything was the best learning ground for me. It set me up for everything I’m doing today. In particular, I learnt how to approach and deal with people. Without people and clients your business is nothing.”

Appanna didn’t just learn by default — he actively worked to expand his understanding of all facets of the business. “At the time I wasn’t planning on leaving to launch my own business,” he says. “I was a shareholder and I wanted to grow that business. That meant understanding as much as possible about how everything worked. If there was something I wasn’t sure of — a process, the numbers, how something worked — I asked. I took personal responsibility for any errors and got involved in every aspect of the business, including areas that weren’t officially ‘my job’. I wanted to really grow and support the business.”

4. Stay focused

Interestingly, while the experience Appanna has accumulated throughout his career has allowed him to build a high-growth start-up, it also taught him the importance of not wearing too many hats as an entrepreneur.

“I’m glad I’ve had the experience of wearing multiple hats, because I’ve learnt so much, but I’ve also learnt that it’s important to pick a lane, not only in what you do as a business, but in the role you play within your business. I also race superbikes in the South African Kawasaki ZX-10 Cup; through this I have learnt how important it is to focus in the moment without distractions and this is a discipline I have brought into the business.”

“If you’re the leader of an organisation, you need to let things go. You can’t be everything to everyone. When I launched ART Technologies, I knew the key to growth would be the fact that although I’m technical, I wasn’t going to run the technical side of the business. I have strong technical partners whom I trust, and there is an escalation framework in place, from tech, to tech manager, to the CTO to me — I speak tech and I’m available, but my focus is on strategy and growth. I believe this is the biggest mistake that many start-ups make. If you’re wearing all the hats, who is looking at where you’re going? When you’re down in the trenches, doing everything, it’s impossible to see the bigger picture.”

Appanna chose his partners carefully with this goal in mind.

“All the partners play a very important role in the business. Ruaan Jacobs’s strength is in the technical expertise he brings to the business and Terry Naidoo’s strength is in the support services he provides to our clients. Terry is our technical manager. He has the most incredible relationship with our customers — everyone wants to work with Terry. But there’s a problem with that too — if we want to scale this business, Terry can’t be the technical point for all of our customers.

“As partners we have decided what our blueprint for service levels will be; this is based on the way Terry deals with clients and he is developing a technical manual that doesn’t only cover the tech side of the business, but how ART Technologies engages with its customers.

“Terry’s putting his essence down on paper — a step-by-step guide to how we do business. That’s how you build a service culture.”

5. Reputation, network and experience count

Many start-ups lack three crucial things when they launch: Their founders haven’t built up a large network, they don’t have a reputation in the market, and they lack experience. All three of these things can (and should) be addressed during start-up phase, but launching with all three can give the business a valuable boost.

Appanna learnt the value of networks at a young age. Born in India, he moved to Zambia with his family as a young child. From there he moved to Tanzania and then Mozambique, attending boarding school in Swaziland and KwaZulu Natal. At each new school, he was greeted by kids who had formed strong bonds.

“I made good friends in those years, but at each new school I recognised how important strong bonds are, particularly as the outsider.”

Appanna’s early career took him back to Mozambique, working with the UN and EY on various projects. When he moved to South Africa, as a non-citizen he connected with his old boss from the UN who offered him a position as information officer for the Regional Director’s team.

His next move would be to the tech company that he would run for just over three years — also the product of previous connections. “Who you know is important, but how you conduct yourself is even more so,” says Appanna. “If your reputation in the market place is good, people will want to do business with you.”

Appanna experienced this first hand when he left to launch his own business. “Some key clients wanted to move with me,” he says. “If I had brought them in it would have settled our business, but I said no to some key customers who hadn’t been mine. I wasn’t ethically comfortable taking them with me.”

One of those multinational clients approached Appanna again six months later, stating they were taking their business out to tender and that they were hoping ART Technologies would pitch for it. “Apart from the Desktop-as-a-Service product, we also provide managed IT services for clients, particularly larger enterprise clients. Due to the client going out on tender and requesting for us to participate, we pitched for the business and won. The relationship with this client has grown, allowing us to offer them some of our services that they are currently testing to implement throughout Africa.”

“I believe how we conduct ourselves is essential. You need your own personal code of ethics, and you need to live by it. Business — particularly in our environment — is built on trust. Our customers need to trust us with their data. Your reputation is key when it comes to trust.”

Interestingly, although Appanna and his team developed their product based on a specific price point, once that trust is built and a certain standard of service is delivered, customers will pay more.

6. Start smart and start lean

Appanna was able to launch ART Technologies with the savings he and his wife, Kate, had put aside. He reached a point where he had ideas he wanted to take to market, but he couldn’t get his current business partners to agree to them — and so setting up his own business became inevitable.

Although he was fortunate to have savings to bootstrap the business, it was essential for the business to be lean and start generating income as quickly as possible. This was achieved in a number of ways.

First, Appanna and Kate agreed on a start-up figure. They would not go beyond it. “We had a budget, and the business needed to make money before that budget was reached.” The runway Appanna gave himself was only six months — highly ambitious given the 18-month runway most start-ups need. “Other than my salary we broke even in month three, which actually extended our runway a bit,” says Appanna.

Appanna had a server that he used to start with, and purchased a second, bigger server four months later. He also launched another business one month before launching ART Technologies — ART Call Management, a virtual PA services business that needed a PABX system, some call centre technology and two employees.

“I’d been playing around with the idea for a while,” says Appanna. “We were focused on SMEs, and I started noticing other challenges they faced. A lot of entrepreneurs just have their cellphones, but they aren’t answering them as businesses — it’s not professional.

“In essence we sell minutes — for R295 you get 25 incoming calls and 50 minutes of transferred calls. We answer the phone as your receptionist, transfer calls and take messages. How you use your minutes is up to you. For example, if you supply the leads, we can cold call for you. ART Technologies uses the call management business as a reception service and to do all of our cold calling. It’s kept the business lean, but it’s also brought in an income that helped us with our runway.” In 2017 ART Call Management was selected as one of the top ten in the SAGE-702 Small Business Awards.

The only problem with almost simultaneously launching two businesses is focus. “It’s incredibly important to know where you’re putting your focus,” says Appanna. “The call management business has been essential to our overall strategy, but my focus has been pulled in different directions at times, and I need to be conscious of that. The most important thing for any start-up is to know exactly where your focus lies.”


Into Africa

Thanks to a distribution deal signed locally with First Distribution, ART Technologies was introduced to Seacom, which has available infrastructure in a data centre in Kenya.

“It’s a pay-per-client model that allows us to pay Seacom a percentage of every client we sign up,” says Appanna. “First Distribution will be our sales arm. They have a webstore and resellers, and we will be opening ART Kenya with a shareholder who knows the local market.”

From there, Appanna is looking to West Africa and Mauritius. “We have the product and the relationship with Seacom gives us the foothold we need to grow into East Africa.”

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Entrepreneur Profiles

Kid Entrepreneurs Who Have Already Built Successful Businesses (And How You Can Too)

All over the world kids are abandoning the traditional notion of choosing a career to pursue until retirement. Gen Z aren’t looking to become employable job-seekers, but creative innovators as emerging business owners.

Diana Albertyn

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Do kids have an advantage or disadvantage when it comes to starting and building a company? It depends on how you look it. Juggling school, friends, family and other aspects of childhood and adolescence comes with its own requirements, but perhaps this is the best age to start.

“Being an entrepreneur means having to learn, focus, and connect to people and these are all traits that are valuable throughout life. Learning this when you are young is especially crucial, and will set you up for success and to be more open to other opportunities,” says billionaire investor, Shark Tank personality and author Mark Cuban.

Here are some of the most successful kidpreneurs who have cashed in on their hobbies, interests and needs to start and grow million dollar businesses borne from passion and innovation:

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30 Top Influential SA Business Leaders

Learn from these South African titans of industry to guide you on your entrepreneurial journey to success.

Nicole Crampton

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Entrepreneurship is said to be the answer to South Africa’s unemployment challenges and slow growth, but to foster entrepreneurship we ideally need business leaders to impact grass root efforts. Business leadership is vital to improved confidence and growth. These three titans of global industry say:

  • “As we look ahead, leaders will be those who empower others.” – Bill Gates
  • “Leaders are also expected to work harder than those who report to them and always make sure that their needs are taken care of before yours.” – Elon Musk
  • “Management is about persuading people to do things they do not want to do, while leadership is about inspiring people to do things they never thought they could.” – Steve Jobs

Here are 30 top influential SA business leaders forging the path towards a prosperous South African future.

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