What have been your goals for the organization after starting in late 2019?
Ever since the inception of Saudi Airlines in 1945, SGS has enjoyed incredible market share and has been a reliable service provider of airport services. After the company went public in 2015, its focus has been on a few key pillars. The first of which is keeping our customers, namely the airlines and passengers, at the center of what we do. We used to treat them as one, but now we have segmented the two. We are now aware that airlines care about quality and cost, so we bring these two into equilibrium. Quality means turnaround time with on-time departure and the ability to meet growing needs. For example, during COVID-19 we had to start checking passenger's temperatures and to ensure that the travellers took PCR tests, and we were agile enough to do this quickly. The second part for airlines is cost, and we have dealt with that simply by deciding that we would no longer be margin driven. We enjoyed extremely high margins of around 20% for years, but we have decided to focus on value and lower the margins to encourage air travel, as a penny saved for airlines is a penny spent for them to bring in more passengers. We look at SGS not just as returning value for shareholders but also returning long-term value for shareholders. We are heavily focusing on institutional investments as opposed to individual shareholders. We want SGS to be a solution provider rather than a service provider, which means being a technology player. We have been rolling out technology solutions starting from 3Q2020 that will continue until the end of the year and include technology platforms and an e-marketplace.
How has technology become a core piece of your internal transformation agenda?
Technology has two folds: digitization and digitalization. The previous management had focused on digitization to drive the internal processes of the company by introducing ERP, SAP, archive, and automated correspondence systems, among others. This was to connect all operations between the front lines and HQ and to look at data in a way that could improve operations. After that, the digitalization part came next. We rolled out our first app with which SGS clients can improve the quality and safety of their operations. Users can now communicate with the relevant personnel through this app. The second app will be rolled out in early 2021; we are introducing an e-marketplace platform where services from our business and suppliers alike will be available. to bring the just-in-time concept of the automotive industry to aviation. We are not benchmarking with anyone in the world, but leading the way and creating a new territory where airports should be nothing more than efficient, functional security machines where one could show up to an airplane in the same fashion as showing up to a train. The execution of this means collection of baggage at malls and coffee shops around town and drop off at airports. In Dubai and Hong Kong, this concept already exists and has been well received. A few years ago, we were digitizing the company, and we are now digitalizing the experience of customers, including airlines and passengers. This includes aligning with the Kingdom's vision for tourism. This is indeed an exciting time to be a Saudi leading a Saudi company!
What has the pandemic changed for you in the short and long term?
Our revenues plunged by 85% as a result of COVID-19, but it is an extended break, and now we have time to make changes. We had a three-to-four-year plan for transformation, and we have completed it in nine months. The drive and momentum meant we could focus on the team. SGS is not just a classic ground services company, but the most experienced, efficient, and capable aviation team in the entire GCC. I am incredibly proud of the people we work with, as we are breaking waves with women not only on the front lines doing jobs, but also in the back office making strategic decisions in an industry that was recently very shy in terms of women's empowerment. We are attracting incredible brains across sectors such as food and beverage, retail, automotive, and petrochemicals with a collection of brainpower coming in from multiple industry backgrounds into aviation. We are also the only GCC-based aerospace entity to have its own innovation hub headed by a PhD researcher to develop our own solutions. That alone is a fundamental change which you will not see elsewhere. We are taking a deeply rooted publicly traded organization and are unshackling everything inside it in order act as a start-up. This attitude and culture could not have happened in nine months if it weren't for our determination to rise back up after the Covid-19 crisis.
What efforts have you made to localize the airline industry in line with Vision 2030?
We looked at our ground support technology and said we need access to technology, centers of excellence, and localization. We partnered with Alvest Equipment Services (AES) from France to create a 50/50 joint venture TLD Arabia Equipment Services. At the same time, we looked at the opportunity presented with COVID-19 in which sanitization in aircraft became a priority and concern globally. Honeywell worked on an ultraviolet UVC disinfection device with technology taken from hospital operating rooms to disinfect surgery tools. We opened a tender and, together with Honeywell, we designed a UVC disinfection device 100% made in Saudi, with 60% of the local components made in country. We do have an ambitious growth agenda, and we want to disrupt the entire aircraft experience globally as we are capable of doing so; however, we also have a national and social mandate with which we operate to ensure that we give back.
What are your plans and expectations for the post-COVID-19 era?
The first thing is to secure our cash position. We established a minimum sustainable resource strategy in January 2020 to ensure the company always had 24 months cash available on hand. This allows us to meet the growth that we want to invest in, and fortunately we had just finished developing the strategy when COVID-19 hit. We had put a target to shave every year for the next three years a minimum of 5% of our OPEX while increasing value. As a result of successfully overcoming the Covid-19 setback, we were able to shave 28% sustainably YoY. We also hired two data scientists to do data mining and plot the sensitivity and recovery of the market with cargo versus air traffic, vaccine rules, and other key indicators. We introduced the resulting model in March, and it is so accurate that governmental decision-making bodies in the Kingdom and our airline customers are asking it. Our own predictions because of the dynamics give us just over two years to three years maximum for a recovery. As such, we now have a competitive cost structure, an ambitious hub, technology solutions, and data scientists to bring all this together and devise the next evolution of solutions to enhance the travel experience. We are extremely optimistic about the future. The pandemic has supercharged our transformation into a different kind of company that is well positioned to capture value in the long term.