Post on 01-Jan-2016
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SAA Overview
Presentation to Public Enterprises Portfolio Committee
SAA CEO and President; Dr Khaya Ngqula
22 June 2005
2
SAA Overview
Bringing the world to Africa, and taking Africa to the world
Agenda
• SAA Business Overview
• The Bambanani Turnaround Programme
• SAA Restructuring
• Exit Plan from Transnet
• Star Alliance
3
SAA Overview
Bringing the world to Africa, and taking Africa to the world
Agenda
• SAA Business Overview
• The Bambanani Turnaround Programme
• SAA Restructuring
• Exit Plan from Transnet
• Star Alliance
4
SAA Overview
Bringing the world to Africa, and taking Africa to the world
SAA Business Overview (1/4)
• Declining yields with the emergence of LCC in Domestic market and strong
competition in some European routes
• Drop in market share especially in domestic market
• Negative Return on Invested capital
• Impact of fuel prices and exchange rates in our international markets
• SAA overall has demonstrated poor operating and financial performance in
the past three years
•The findings by external consultants also indicated that our headcount per
flight is not in line with that of other airlines.
To continue surviving as an airline we had to do something different
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SAA Overview
Bringing the world to Africa, and taking Africa to the world
SAA Business Overview(2/4)
2,150
-4, 035
-12,719 -13,003
FY01/02 FY02/03 FY03/04 FY04/05 EST
Cumulative Net Profit Before Tax for the last three yearsNPT ( Rm )
0
2,000
-2,000
-4,000
4,000
-6,000
-8,000
-10,000
-12,000
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SAA Overview
Bringing the world to Africa, and taking Africa to the world
SAA Business Overview(3/4)
349
-870
-6,066
FY2002 FY2003 FY2004 1H FY2005
Operating Profit for the last five yearsProfit ( Rm )
-2,000
0
-4,000
1,500
-6,000
-8,000
-10,000
FY2001
500
1,000
365
-8,087
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SAA Overview
Bringing the world to Africa, and taking Africa to the world
SAA has therefore launched the Bambanani programme, to improve
operating and financial performance, and take advantage of market
growth, and this include the;
– Profit Improvement Programme – focused on unit cost reduction
– Sales & Marketing plan – aiming to boost share of premium customers
– Customer Service Delivery programme – provide consistent, high quality
service throughout the travel experience
– Profit focus on all decisions – all strategic decisions based on their impact
on contributions (as opposed to market share or revenues alone)
SAA Business Overview (4/4)
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SAA Overview
Bringing the world to Africa, and taking Africa to the world
Agenda
• SAA Overview
• The Bambanani Turnaround Programme
• SAA Restructuring
• Exit Plan from Transnet
• Star Alliance
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SAA Overview
Bringing the world to Africa, and taking Africa to the world
PatronagePatronage
ProfitProfitPeoplePeople
SAA’s TurnaroundSAA’s TurnaroundStrategyStrategy
SAA’s turnaround strategy focuses on the three pillars, which refer to our key stakeholders ( People, Customers, and Shareholders )
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SAA Overview
Bringing the world to Africa, and taking Africa to the world
The Bambanani Turnaround Programme
• Launched customer service programme for
11000 employees worldwide
• Risk Management established
Internal audit
Compliance
Financial Risk
Business Risk
People
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SAA Overview
Bringing the world to Africa, and taking Africa to the world
The Bambanani Turnaround Programme
• Re-aligning positions to eliminate
duplication throughout the airline.
• Appointed a new Leadership team that will
help drive the turnaround strategy.
People
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SAA Overview
Bringing the world to Africa, and taking Africa to the world
• Looking into our product to ensure
consistency in all markets.
• MOU signed with JET Airways and India for
seamless travel experience.
The Bambananani Turnaround Programme
Patronage
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SAA Overview
Bringing the world to Africa, and taking Africa to the world
• Reviewing service standards at all touch
points in line with that of leading airlines.
• The process to join STAR is on track to give
our customers exposure to Star Alliance
Frequent Flyer Programmes.
The Bambananani Turnaround Programme
Patronage
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SAA Overview
Bringing the world to Africa, and taking Africa to the world
The Bambanani Turnaround Programme
• Cost diagnostics with Mckinsey
• Launched New Routes all effective July05
o Washington DC
o Livingstone
o Zanzibar
Profit
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SAA Overview
Bringing the world to Africa, and taking Africa to the world
The Bambanani Turnaround Programme
• Move existing international routes to dailies
o Zurich/Paris/Sao Paulo/Mumbai
o CPT – FRA
• Application for additional frequencies
Accra, Lagos, Luanda
• Feasibility study on China route
• Reestablishment of JHB Bangkok route in
October05
Profit
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SAA Overview
Bringing the world to Africa, and taking Africa to the world
Agenda
• SAA Overview
• The Bambanani Turnaround Programme
• SAA Restructuring
• Exit Plan from Transnet
• Star Alliance
17
SAA Overview
Bringing the world to Africa, and taking Africa to the world
Problems with old organization
– Too many direct reports to the CEO
– Unclear roles & responsibilities among management team and unclear accountabilities (e.g., fleet planning)
– Inefficient structure, e.g., duplication of tasks across organization
– Limited focus on core airline business operations
– No integrated management of investments and subsidiaries
– No alignment of structure along strategy and no link with performance management
– From 10 to 7 direct reports to CEO
– Clearly defined and delineated roles and responsibilities among ExCo
– Organization significantly streamlined based on benchmarking
– Dedicated COO to bundle and focus on core airline operations
– Management of subsidiaries integrated into core business (e.g., technical)
– KPI-based performance contracts designed and tied to strategic objectives of SAA
Problems with old organization Improvements in new organization
Improvements in the new organization
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SAA Overview
Bringing the world to Africa, and taking Africa to the world
SAA Structure Prior to Restructuring
CompanySecretary
CEO
Board
EVP Human Resources and Transformation
EVP Operations and Customer
ServiceEVP Subsidiaries EVP Commercial EVP and CFO EVP SAA Technical
VP:HumanResource
VP : Legal
VP : Treasury
VP : Finance
VP : Fleet
CIO
VP: Cargo
VP:Marketing
VP Alliance, Network & Revenue Management
VP:Global Sales
VP: Operations
VP: CustomerService
VP:Global PaxServices & OCC
VP:Subsidiaries
NB : CSSE - Corporate Safety, Security and Environment
VP: Western Cape Business Dev
VP : CSSE VP : Comms &Gov Liaison
Deputy CEO
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SAA Overview
Bringing the world to Africa, and taking Africa to the world
New Management Structure (1/7 )
CEO Level Structure
Board
CEO
CFO CROGeneral Counsel
GMCommunication/
Customer Service
GMBusiness
Development
GMHuman
Resources
CompanySecretary
COO
Changes made in the old structure
This structure focuses on effective Governance
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SAA Overview
Bringing the world to Africa, and taking Africa to the world
COO Level Structure
Head Network,Planning
Distribution
GeneralSales
Manager
HeadMarketing
HeadPassengerServices
HeadTechnical Operation
GMCargo
COO
CIO
Head Safety,Security
Environment
New Management Structure (2/7 )
This structure focuses on efficient operations
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SAA Overview
Bringing the world to Africa, and taking Africa to the world
•Our new structure is built upon our guiding principles of Profit, Patronage and People, as
–We have created full transparency on roles and responsibilities
–We have established clear accountabilities and avoiding duplication of activities/responsibilities
–We endeavour to achieve higher efficiency, effectiveness and quality in our work through realigning our functions to our strategy
New Management Structure (3/7 )
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SAA Overview
Bringing the world to Africa, and taking Africa to the world
•Both our customers and people will benefit from the new organization, as
–We have consolidated all customer service functions in a dedicated unit to provide consistent excellence in service delivery
–We have broken-down functional silos and re-enforce cross-functional processes with clear interfaces and governance bodies to establish process stability for our people
New Management Structure (4/7 )
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SAA Overview
Bringing the world to Africa, and taking Africa to the world
•Excellent performance to drive SAA-growth will be measured and rewarded, as
–We are developing our new performance management contracts around Key Performance Indicators, which are linked to driving Profits, Patronage and People initiatives
–We will be rewarding our staff for excellence in performance and establish a fact-based system of measuring performance
New Management Structure (5/7)
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SAA Overview
Bringing the world to Africa, and taking Africa to the world
•To increase efficiency and effectiveness we
streamline our management levels, as
–We have reduced management levels from 7 to 3 to
simplify the organization
–Get employees close to management and get
management closer to customers
–We are basing the recognition of individuals more on
their roles and responsibilities rather than on their titles
New Management Structure (6/7)
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SAA Overview
Bringing the world to Africa, and taking Africa to the world
In reinforcing our workforce and realigning our management, we applied the following principles;
• A Focus on People
• A Focus on strengthening Risk Management
• An Aggressive Focus on Customer Service
throughout the organisation
• A culture of excellence with profit and cost control
New Management Structure (7/7)
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SAA Overview
Bringing the world to Africa, and taking Africa to the world
As part of the Restructuring process, SAA had to introduce Severance Packages ( VSP’s ) for management staff
9
22
36
0
5
10
15
20
25
30
35
40
ExecutiveManagement
SeniorManagement
JuniorManagement
Total Approved : 67
Total Cost : R42 m
Approved Severance Packages for Management
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SAA Overview
Bringing the world to Africa, and taking Africa to the world
Agenda
• SAA Overview
• The Bambanani Turnaround Programme
• SAA Restructuring
• Exit Plan from Transnet
• Star Alliance
28
SAA Overview
Bringing the world to Africa, and taking Africa to the world
Progress to date
• Positive competition advisory opinion obtained
• Draft SAA Bill drafted
• Legal and tax due diligence completed
• Pension fund related obligations largely quantified (subject to
finalisation by fund actuaries)
• Financial modeling and preliminary reports of impact of transfer
on SAA and Transnet have been completed
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SAA Overview
Bringing the world to Africa, and taking Africa to the world
Next steps
Transnet/SAA/Public EnterprisesNegotiations in relation to:what is to be transferred consideration payable
SAA/Transnet/Public Enterprises/National Treasury
Consideration of due diligence reports, business case and financial models and implications for proposed transaction
Deutsche Bank Finalise the financial evaluation reports on Transnet and SAA
Public EnterprisesComplete business case analysis for SAA as stand alone SOE
Responsibility Action items
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SAA Overview
Bringing the world to Africa, and taking Africa to the world
Next steps continued
Public EnterprisesCommence legislative process (targeting August 2005)
Transnet/SAA/SHG/DBEngage with Transnet and SAA lenders required consents/waivers
SHG/Public Enterprises/National Treasury
Draft PFMA Amendment
SHG/Public EnterprisesFinalise SAA Bill and supporting documentation
Responsibility Action items
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SAA Overview
Bringing the world to Africa, and taking Africa to the world
Agenda
• SAA Overview
• The Bambanani Turnaround Programme
• SAA Restructuring
• Exit Plan from Transnet
• Star Alliance
32
SAA Overview
Bringing the world to Africa, and taking Africa to the world
SAA Current Network
Sao Paulo
New York
Atlanta
Hong KongBombay
PerthMauritius
Washington DC
Europe : 5 Destinations
Africa : 19 Destinations
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SAA Overview
Bringing the world to Africa, and taking Africa to the world
Star enables SAA to leverage a global network; revenue benefit is driven by the connecting potential Star generates
Key:
Star
SAA
Proposed SAA
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SAA Overview
Bringing the world to Africa, and taking Africa to the world
Key Milestones …before joining we still need to
• Sign the joining documents or the MOU
– The MOU has already been signed in December 2004
• Competition Implications
– SAA’s request for an advisory opinion from the Competition Commission
Becoming bound by the various agreements that define the alliance
Agreeing to comply with certain minimum requirements provided in those agreements
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SAA Overview
Bringing the world to Africa, and taking Africa to the world
Key Milestones continued…
•IT Requirements
–The decision to migrate to a new reservation system has implications on migration
•Pay the joining fee
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SAA Overview
Bringing the world to Africa, and taking Africa to the world
Thank You