Novick to launch jets of new airline

PETA KROST MAUNDER

The airline industry was dinner-table conversation in the Novick household from as far back as Novick could remember, but he left it with no regrets.

Now, almost 10 years later, he’s gearing up to launch a new local airline while the rest of the industry is floundering. As he makes plans for his new brand, South African Airways (SAA) and Comair are in business rescue and may not survive the year. Also, around the world, airlines are battling to survive.

Novick is well aware that it’s a big risk, but he believes “this is the perfect time to start an efficient, flexible airline with shock absorbers and limited overheads”.

Truth is, while it may be risky, there is conviction in the local industry that if anyone can do this, Novick can.

He has a deep understanding of what it would take, having launched the then innovative airline kulula.com in 2001 as a part of the Comair stable. This was the first low-cost airline in South Africa, and was seen to be an exciting disruptor in the industry.

The idea behind launching a new airline, he said, was opportunistic. “The circumstances are such that it’s appealing and timely,” he told the SA Jewish Report this week. “Right now, there are a number of unwieldy airlines with lots of inefficiencies and massive overhead and debt. So, they can’t be flexible, and are huge monsters to feed.”

He cites SAA and Comair as two of these. As he watched the two of them imploding, he saw unmistakable opportunities. “SAA isn’t commercially driven, and there are lots of labour inefficiencies, massive debt, and leveraged burdens it cannot support when things turn bad. It has no shock absorbers.”

Meanwhile, the current environment is very attractive, according to Novick. “There are many planes available at great prices to buy or lease, and there are lots of quality and experienced airline people available and willing to work on a much more flexible and variable basis,” he says. “Also, there are maintenance facilities that are underutilised, and then you also have all the necessary resources available on a flexible basis.”

Add to that Novick’s extensive network of relationships that, he said, surprised him. “I found I had an instant connection and common understanding with people I haven’t spoken to in 10 years.”

He’s aware that airlines will shrink, and there will be a smaller market for a while, but people will eventually want and need to fly again.

There are two main elements to his model. First, keeping things efficient with the cost of production competitively low, with relatively low ticket prices, and then maintaining flexibility to withstand global downturns.

He intends to limit fixed overheads and commitments so that when the organisation doesn’t fly, it doesn’t spend money. “We fly when there are enough people to fly, and we ensure there aren’t lumbering overheads,” he says.

He’s in no rush to launch as right now, few are flying. “We’ll wait most likely until the summer.”

In the meantime, he is spending 20% of his time on this, while running Lucid Ventures, the Section 12J venture-capital fund behind the Home* Suite Hotels boutique brand. He started this after leaving Discovery, where he was chief executive of Vitality and head of digital for three years after leaving Comair.

As the chairperson of SA Harvest, he is also passionate about the food rescue and distribution platform’s aim to enable all South Africans to have daily access to adequate nutritious food.

And until his airline is up and running, he’s thoroughly enjoying doing the puzzle, and pulling the right pieces together for it. “I’m still unclear about what it will look like exactly, but it will cost less money than most assume,” Novick says.

“Yes, it’s scary, but I guess I’ve become more in tune with managing risk as I get older. I see it as positive. I have a sharper focus and understanding of where things can go wrong, so I’ll spend time and effort in mitigating this.”

He resonates with the philosophy of Herb Kelleher, the legendary founder of Southwest Airlines, which is to be “flamboyant marketers, but financially conservative”.

At the same time, he taps into the philosophy of another great business leader, Warren Buffett: “Be fearful when others are greedy, and greedy when others are fearful”.

There are many who are fearful in the travel and tourism industry right now. “We need to have the context that the world isn’t going to end, we will need all these services again, and it’s a good time to take advantage while people’s focus is diverted,” says Novick.

He has secured investment from family and friends particularly because he doesn’t want to ask strangers to take this risk. The reaction of those he approached for funding, he says, was first surprise and, once they had thought it through, they bought into it. “It’s a matter of not being overly bold and mindful, and not throwing too much at it,” he says.

Novick predicts that business travel is going to reduce and become more deliberate, with people opting for online meetings where possible. However, he is bullish about tourism in South Africa drawing people onto flights. He also believes that after lockdown ends, there will be a huge pull to travel again. “One of the biggest desires of the entering middle class is to experience things rather than spend money on products, and that won’t go away.”

Novick says his late father, Dave, who passed away in September last year, is a huge inspiration for him in this and other ventures. “My dad was always entrepreneurial, but conservative. He would think of the worst-case scenario and work back from there, which is a great way of managing risk. You confront the low road, park it, and build on it. He hated debt, and stayed away from it wherever he could. He believed it was the killer of businesses and personal wealth,” Novick says.

He also realised when his dad died and so many attended his funeral that his business relationships had become personal relationships, and he had managed to build such a breadth of strong long-term relationships. “This is the ingredient to life, and in building a business,” Novick says.

“Business is difficult when addressing hardcore commercial issues, competitors, and other selfish capitalist factors, and it’s hard to be altruistic,” he says. “However, the way forward is to do business, constantly thinking about how to protect and give the customer the best deal. People have a right to demand that companies are better and fairer. While we can’t be naïve, we can be fair, authentic, and open. This builds relationships and trust.”

The new airline will, without doubt, be built on this.