Progress made in action plan: SAA

An SAA plane at OR Tambo in Kepmton Park Gauteng. Photo: Leon Nicholas

An SAA plane at OR Tambo in Kepmton Park Gauteng. Photo: Leon Nicholas

Published Feb 16, 2015

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Johannesburg - Two-thirds into SA Airways' “90-day action plan”, there has been significant progress in returning it to relative stability, the airline said on Monday.

“The strong implementation progress that is being made on the 90-day action plan has seen tangible steps taken to fundamentally change SAA in financially quantifiable ways,” acting CEO Nico Bezuidenhout said in a statement.

“While it is business unusual at SAA, the implementation of the 90-day action plan has seen immediate beneficial commercial decision-making on the one end, while cost-compression measures have been substantially tightened to ensure that the business returns to relative stability.”

The plan, which ends on March 24, was implemented in agreement with the Treasury to address gaps in SAA's long-term turnaround strategy (LTTS).

SAA was one of three state-owned companies transferred to the Treasury from the department of public enterprises on December 12, after Minister in the Presidency Jeff Radebe said Cabinet was concerned about its performance.

SAA expects to improve operating performance in the financial year ending March 2016 by approximately R1.25 billion through the plan's implementation.

Network reconfigurations, including the discontinuation of loss-making direct flights between Johannesburg, Beijing, and Mumbai, would result in savings of around R600 million a year.

The reconfigured network would not sacrifice connectivity, as there would be deepened commercial relationships between SAA and a number of Gulf-state and other carriers.

SAA's first direct flight between Johannesburg and the Middle East would take off on March 29, enabling further network growth with Gulf carriers, particularly to China and India.

In the past two months, SAA had grown its sub-Saharan African network, with more frequent flights between Johannesburg, Maputo, Harare and Mauritius, among others.

“It's an exciting time and we are seeing commercially sound network decisions receive full backing from our board and shareholder,” Bezuidenhout said.

SAA had re-negotiated around 40 percent of identified contracts, resulting in annualised savings of R91m so far.

It was re-validating its LTTS in terms of underlying macro-economic and capital structure assumptions. One such factor was that when the LTTS was developed in 2013, the rand was 40

percent stronger and oil cost more than double the current and forecast trading price of Brent crude.

SAA had re-negotiated fleet lease re-extensions of three of its A340 aircraft, which already showed a saving of R112m a year.

Another five aircraft-lease extensions and re-negotiations were expected to yield additional savings in excess of R150m later in the year.

Bezuidenhout said: “Governance is being strengthened substantially and effort is being applied under trying circumstances to change the public reputation of the business.”

Sapa

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