SAA in full Long-Term Turnaround Strategy mode – heading toward a stable and sustainable national airline

The successful completion of the 90-Day Action Plan at the end of March this year saw South African Airways position the business for the full implementation of its Long-Term Turnaround Strategy. At the time, the SAA Group affected changes within the business that would see approximately R1,25 billion in annualised EBITDA improvements for the financial year 1 April 2015-31 March 2016. Moving ahead, SAA has prioritised and fully aligned its short- and medium-term objectives, following the recent change afforded by the 90-Day Action Plan.

Review of the first few months of the new financial year starting 1 April 2015:

  1. The SAA Group realised positive year-on-year gains in almost all of the market segments in which it is active.
  2. The launch and positive market response to the Accra (Ghana)-Washington, DC route: first flight scheduled for 2 August 2015.
  3. Demand in the South African market remained weak with a 7% growth in available capacity across the domestic market, against overall growth of just over 2%, indicating an oversupply of around 5%. Commercial adjustment to lower demand saw SAA increase load factors to an 81% aggregate during this time.
  4. SAA saw a reduction of operating cost by 14% compared to the same period last year and unit costs were 7% lower than a year ago and 10% below budget – in part driven by lower oil prices.
  5. Africa remains SAA’s strongest performing business segment with all routes trending upward, despite segments impacted by the ebola outbreak late last, and early this, year.
  6. SAA was named Skytrax Best African Airline and Best Customer Service in Africa at the World Airline Awards and Best African Airline at the World Travel Awards.

SAA’s top priorities for the next six months are:

  1. The implementation of its route network and fleet plan, as already accelerated through the 90-Day Action Plan. Over time, an airline stands the risk of inadvertently injecting inefficiencies into its network plan. Following an extensive study of the current plan, SAA has found that there is a wide range of improvement opportunities identified, with a projected positive impact of R 2,5 billion in annualised earnings. This will significantly curb losses and position the airline for future growth.
  2. SAA will also continue to focus on partnerships. No airline is able to service every route with its own aircraft and, through effective partnerships and code-sharing, SAA’s reach will         continue to grow, as was the case with our expanded middle-Eastern operations thus far, adding 26 additional destinations and source-markets to the SAA network.
  3. Revenue gain: this includes addressing several commercial areas, including much tighter revenue management, as well as developing a new distribution strategy where SAA closely embraces and leverages Travel Agency and TMC partners. To optimally cast SAA’s revenue-net and claw back past inefficiencies, a cohesive approach is required which will see SAA’s internal efforts supported by aligned marketing and communication activities, using powerful, owned channels, such as Voyager, to effectively communicate our value proposition.
  4. Cost compression remains a key focus area. The business will continue to seek optimised efficiencies throughout every aspect of the company. Ongoing savings initiatives will be implemented without compromising the quality and reliability of product. In this regard, in excess of R2 billion in initiatives have been quantified, ranging from labour cost management through to supply-chain re-engineering. Growing the revenue line while simultaneously managing cost down – not through a programme, but through instilling a particular cost-conscious culture – is the quickest and most sustainable way of ensuring sustainable bottom-line results.
  5. The strengthening of governance, risk management and optimisation of the Group structure represents the ongoing areas of emphasis where matters are to be  addressed, such as how do the Group companies inter-relate to each other, how is each one set-up to best service its chosen markets and do we have a best-practice control environment that pro-actively manages the inherent risk present within an Aviation Group.
  6. A clear drive towards performance excellence, notably within the human capital arena, completes our near-term area of focus. Beyond the performance excellence is envisaged for the SAA business as a whole, which translates into individual accountability.
  7. African growth: SAA already operates in more than 50% of the 54 African Union member states. However, with a vision to be “Africa’s Leading World-Class Airline”, the airline plans significant growth in Africa in all our major market segments, e.g. passenger, cargo and technical services.

 

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