SA EXPRESS Presentation to the SOE Portfolio Committee

17 June 2009

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Contents• Background • Airline Categories• Route Network• Financial Highlights • Strategic Focus• Financial Projections for FY2009-10• Challenges

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Background• South African Express (SAX) was established in 1994 as a regional

feeder airline to South African Airways

• SAX operates predominantly on routes that are secondary within South Africa and the region, e.g. Bloemfontein, Kimberley, Richards Bay, George and Gaborone, Botswana. These routes cannot be served viably with larger aircraft

• The majority of SAX customers (75%) are business travellers commuting between major hubs and secondary routes (the Hub-and-Spoke system)

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Airline Categories

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HOEDSPRUIT

NELSPRUITKruger National Park

MAPUTO

RICHAregional divisionS BAY

DURBAN

EAST LONDON

PORT ELIZABETH

KIMBERLEY

MAUN

GABORONE

LUBUMBASHI

WALVIS BAYWINDHOEK

CAPE TOWNGEORGE

JOHANNESBURG

BLOEMFONTEIN

Current Network

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Current SAX Fleet: 23 aircraft12x CRJ200

Ave Age: 8.5yrs

2x CRJ700Ave Age: 7.7yrs

7x Dash 8-300Ave Age: 14.4yrs

2x Dash 8-Q400Ave Age: 3.1yrs

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Financial Highlights

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Highlights of FY2008-09• Won the “Overall Q400 Reliability Performance Award” for

the Q400 aircraft type from Bombardier

• IOSA accreditation leading to full IATA membership

• SA Express acquired 2x CRJ 700 (70 seat)

• Awarded contract to carry all the teams domestically during the FIFA Confederation Cup

www.FIFA.com

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Financial HighlightsRevenue has more than doubled over the last five years

0

200

400

600

800

1000

1200

1400

1600

1800

FY2004-05 FY2005-06 FY2006-07 FY2007-08 FY2008-09

Note: FY2008-09 is budget figures

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Financial HighlightsOperating profit has grown by over R300m over the last 5 years

Note: FY2008-09 is budget figures

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Financial Highlights SAX became solvent in FY2007-08 and has sustained and

improved this status

Note: FY2008-09 is budget figures

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Balance Sheet Performance

• On target to increase the total assets by over 30% compared to last year

• Positive Net asset value

• On target to reduce liabilities by over 50%

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Strategic Focus

Short-Term Goals• Consolidate presence in

domestic secondary markets

• Implement the DRC opportunity

• Develop human capital• Build a sustainable cargo

business• Continue to improve

efficiencies

Long-Term Goals• Fully establish the intra-

Africa hub strategy• Improve the Retention

Strategy and Talent Management Plan

• Be the employer of choice in the aviation sector

• Reposition the South African Express brand

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Regional Expansion Strategy

• Opportunities exist for SAX to establish hubs, in Central Africa, East Africa and West Africa

• The strategy to play a major role in the region has been attempted by other airlines, but has been unsuccessful for following reasons: Aircraft too large to operate profitably in developing these new routes

(not enough feeder market into hub) Fear of dominance Inadequate frequency out of hubs if larger aircraft are utilised

• SAX core business has for the last 15 years been to service secondary markets. Experience has shown that frequency and right capacity are key to opening secondary markets.

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In partnership with other African carriers and non airline entities SAX aims to: Serve the regional local markets

Provide intra-continental daily connectivity

Concentrate intercontinental traffic at hubs to provide better connectivity

Benefit to other African carriers: Increased revenue from stimulated

markets

Lower costs from sharing maintenance, systems, aircraft etc.

In partnership with other African carriers and non airline entities SAX aims to: Serve the regional local markets

Provide intra-continental daily connectivity

Concentrate intercontinental traffic at hubs to provide better connectivity

Benefit to other African carriers: Increased revenue from stimulated

markets

Lower costs from sharing maintenance, systems, aircraft etc.

Intra-Africa Hub Strategy

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DRC opportunity SAX currently operates the route

between Johannesburg and Lubumbashi, and has identified the opportunity to extend its operation within the DRC, in joint venture with a local partner

The airline plans to extend its operation to Kinshasa as follows:

JNB – FBM – FIH – FBM – JNB

SAX had already received an in-principle PFMA approval in 2008 and is now waiting final approval

SAX currently operates the route between Johannesburg and Lubumbashi, and has identified the opportunity to extend its operation within the DRC, in joint venture with a local partner

The airline plans to extend its operation to Kinshasa as follows:

JNB – FBM – FIH – FBM – JNB

SAX had already received an in-principle PFMA approval in 2008 and is now waiting final approval

To JNBTo JNB

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FY2009-10 Budget Highlights and Assumptions

• Increase turnover by 15%– Increase net contribution from cargo revenue by up to 80%– Increase capacity on major SAX routes (e.g. BFN, KIM, etc.)– Implement the regional expansion strategy in the DRC– Grow 3rd party maintenance

• Increase profit by 6%• Contain costs as per FY2008-09, excluding exposure to volatile

markets– Continue to focus on reducing administration costs by adopting low-

cost principles

• Increase capital investments by 8%

Note: Financial assumptions prior to Economic meltdown

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Challenges

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Operating Challenges

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Economic Challenges

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Global perspective

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Domestic perspective

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Thank you