SAA’s achievements ensure that it’s well positioned for full implementation of the Long-Term Turnaround Strategy (LTTS)
On 24 March 2015, SAA completed the 90-Day Action Plan, which commenced late last year and was a roadmap to stabilise the carrier and resume full implementation of a refined LTTS.
“South Africans now have a national aviation asset which is well on its way to relative stability,” says SAA Acting CEO Nico Bezuidenhout. “The intent and core strategic impetus remains a constant; the board and management of SAA are unyielding in their resolve to fuel SAA’s future success and short- to medium-term stability.”
A full review of the current macro-economic conditions impacting the LTTS formed part of the 90-Day Action Plan. SAA also attended to the following issues as part of the plan:
1. Business liquidity and ongoing solvency: SAA received a going-concern guarantee from the National Treasury on 22 December which enabled it to finalise its annual financial statements and hold its annual general meeting.
2. Future funding of the business:
* The board has investigated several future funding models and will table recommendations to the National Treasury.
* Steps have been taken to change the debt profile of the business.
3. Correction of governance defects:
* SAA has completed all identified contract renegotiations, which forms part of a strengthening of governance controls within the procurement area and a re-focus on cost compression.
* Implementation of an overhaul of governance structures has seen the airline place a substantial focus on accountability.
* A key component of the 90-Day Action Plan was a refinement of the LTTS, which included revisiting SAA’s network structure, fleet solution and financial forecasting and planning.
4. Review of high-level governance framework:
* Onerous agreements were identified and renegotiated. Among them, SAA ]negotiated fleet lease re-extensions of three of its fleet of eight Airbus A340 aircraft, representing a positive impact of R112 million annually. Further aircraft lease extensions and re-negotiations currently in play are expected to yield additional savings in excess of R150 million later in the year. Total savings expected amount to R262 million.
* The airline’s position vis-à-vis all long-term contractual engagements, procurement governance and other legal positions were examined, with recommendations submitted to the board for approval and subsequent action by SAA management.
5. Re-organisation of assets:
* SAA has reviewed and optimised its network and fleet plan to ensure commercial sustainability. Recent network reconfigurations stand to positively impact SAA in the region of R440 million per annum, arising from the closure of loss-making direct flights between Johannesburg and Beijing, and Johannesburg and Mumbai, without sacrificing connectivity through deepened commercial relationships with a number of Gulf-state and other carriers. SAA launched its first direct flight between Johannesburg and Abu Dhabi on 29 March and this will enable further network growth through end-point code-sharing with Etihad, particularly to China and India. SAA has also extended its sub-Saharan African network with frequency additions between Johannesburg and Maputo, Harare and Mauritius, among others.
* SAA has embarked on a process to right-size its human capital through a natural attrition process.
6. Implementation of effective communication: SAA has made positive inroads into repairing its relationship with the media, ensuring a constant flow of information, proactivity and co-operation with journalists.
Total annualised EBITDA improvement, from the commencement of our new financial year on 1 April 2015, realised through the 90-Day Action Plan, will amount to R1,25 billion, as per the initial target as agreed in November 2014. This consists of: R440 million through network changes; R290 million relating to fleet financing/composition changes; R100 million recovering stalled LTTS implementation measures; and R425 million from reviewing onerous agreements, including over 150 procurement contracts.
“The successful completion of the 90-Day Action Plan has placed SAA in a better position to drive further achievement. In addition, the principle of transparency and continually communicating our successes and challenges to South Africans will continue. We need the support and contribution of every stakeholder. When we get it wrong, we expect criticism, but support and recognition of achievements are equally as important. SAA is an asset whose economic benefit is realised daily, in many shapes and forms, across every socio-economic strata of our country,” says Bezuidenhout.
SAA connects SA to its major trade and tourism partners, thereby supporting 33 000 jobs in the country and contributing R9 billion (approximately 0,3%) to its GDP every year. Approximately 40% of all passengers and more than 50% of all air cargo within and to SA last year was carried by the SAA Group or under the SAA code. No South African airline trains more pilots and technicians, procures more from local suppliers or has taken more steps to protect the environment than SAA.