April 2015 African Pilot 25Airline Focus
One of the most important issues that has been missing over the past few
years was the realistic and honest engagement with the media, which is
clearly the approach Bezuidenhout will implement to repair the damage
created by his predecessors. The reality is that once the national media
including the aviation media obtains a clear and honest view of the present
predicament of the national airline, whilst at the same time we are presented
with a realistic approach to remedy the
situation, there will be far more positive
media reporting about SAA.
HOW TO FIX SAARecent and planned network confi gurations
stand to positively impact SAA in the region
of R600 million per annum, with the best
cost saver being the culling of loss making
direct fl ights between Johannesburg and
Beijing and Johannesburg and Mumbai,
without sacrifi cing connectivity through deepened commercial relationships
with a number of Gulf-state and other carriers. SAA will launch its fi rst
direct fl ight between Johannesburg and the Middle-East on 29 March,
which will enable further network growth through end-point code-sharing
with Gulf carriers, particularly to China and India. During the previous two
months SAA has also grown its sub-Saharan African network due to strong
commercial demand with frequency additions between Johannesburg and
Maputo, Harare and Mauritius amongst others. Bezuidenhout said that SAA
will announce further network reconfi gurations in the coming months as well
as new commercially attractive destinations, which have the backing
from the board and shareholder.
SAA has already completed nearly 40% of identifi ed
contract renegotiations, which form part of a
strengthening of governance controls within
the procurement area and re-focus on cost
compression. This has thus far resulted
in annualised savings of R 91 million.
A key component of the 90 Day Action
Plan is a revalidation of the Long
Term Turnaround Strategy (LTTS),
which is currently re-evaluating
underlying macro-economic and
capital structure assumptions
and their impact on SAA’s
strategy. When the LTTS
was developed in 2013, the
Rand was 40% stronger than
it is today and oil cost more
than double the current and
forecast trading price of Brent
crude today.
SAA has also renegotiated
fl eet lease re-extensions of
three of its A340 aircraft, already
representing a positive impact
of R 112 million annually. A further
fi ve aircraft lease extensions and renegotiations are expected to yield
additional savings in excess of R 150 million later in the year. SAA expects
to improve operating performance by approximately R 1.25 billion through
the implementation of the 90 Day Action Plan, in the fi nancial year ending
March 2016. SAA is also re-negotiating its initial purchase of twenty Airbus
A320s to change the fi nal ten aircraft that still have to be delivered into
orders for fi ve wide-body Airbus A330s that
will be better suited to service SAA’s long
haul African destinations. At the time of
writing this deal had not been fi nalised as
Bezuidenhout wanted Airbus to ‘sharpen
its pencil’ somewhat before concluding the
deal through a leasing company.The strong implementation progress that is
being made on the 90 Day Action Plan has
seen tangible steps taken to fundamentally
change SAA in fi nancially quantifi able
ways. Corporate governance is being strengthened substantially and effort is
being applied under trying circumstances to change the public’s perception
of the business. This focus continues to drive South African Airways toward
relative stability at the end of the 90 days in March 2015. For example over
the past fi ve years SAA’s staffi ng complement had increased by a headcount
of nearly 1 700 people, without any real growth in turnover.“Any management team
can pull the wool overthe eyes of its board and
shareholders, but all that
actually counts is the
balance sheet, which
cannot be hidden away.”