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Plans for SAA and Africa

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Old 17-04-2015, 01:34 PM   #1
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Africa Plans for SAA and Africa

With the conclusion of the 90 Day Action Plan, South Africans now have an aviation asset, says South African Airways (SAA) acting Chief Executive Officer, Nico Bezuidenhout.

“As the 90 Day Action Plan period concluded South Africans now have a national aviation asset that is well on its way to relative stability,” he said on Thursday.

Briefing reporters, Bezuidenhout said that as far back as December the airline was in a precarious position and that it was technically not a going concern and was experiencing substantial liquidity and solvency challenges among others. “The company was in trouble,” said the acting CEO.

Bezuidenhout said the objective of the 90 Day Action Plan, which concluded on 24 March, was to stabilise the organisation and that “we put it on a path to recovery”.

During the duration of the plan, SAA focussed on intervention areas such as commercial stability to restore solvency, governance which included the improvement of control mechanisms and the third being a strategy to revise the Long Term Turnaround Strategy (LTTS).

“When I stood here in December I said that you will hold me accountable for R1.25 billion in changes that we have to effect,” he said, adding that the changes would consist of route and network changes, renegotiation of contracts and restructuring of lease agreements and aircraft activities and actions focussed at reducing the cost of aircraft ownership.

The acting CEO said that the going concern status of the business was effectively restored at the end of January and the airline was able to hold its Annual General Meeting.

Beyond that the company focussed on restructuring its debt profile.

“We’ve also realised substantial cost reductions, SAA has in the last three years reduced its unit costs by approximately 17%.”

Over the 90 day period, the airline looked at renegotiating a number of contracts, supply contracts for the full fiscal ending March 2015. “Cost reduction was just over R400 million. Beyond that we also renegotiated aircraft leases on specifically our A340 fleet, those savings that have already materialised of renegotiated leases in place, amounts to approximately R120 million and the total will amount to R270 million,” he explained.

Over the 90 days, the airline revisited the areas where it flies to. The airline no longer flies to Beijing which cost the organisation approximately R1 billion over three years. “That route has now been removed and therefore those losses have been removed,” he said, adding that connectivity had not been sacrificed as others carriers. The route to Mumbai has also been removed.

The airline is to also focus on African operations. “Our African operations are by far our most profitable operations,” noted Bezuidenhout.

“Total annualised EBITDA improvement from the commencement of our new financial year on 1 April 2015 realised through the 90 Day Action Plan will amount to R1.25 billion as per the initial target as agreed in November 2014.”

This consists of R440 million through network changes, R290 million relating to fleet financing, among others.

Additionally, the airline has reconstituted the board. In a statement on Thursday, National Treasury said that the Finance Minister has extended the term of the interim Board for a further period of six months or until such time as a permanent Board is appointed.

“This extension ensures that the Board continues its business whilst allowing the National Treasury the opportunity to finalise the Cabinet approval process,” it said.

This extension was made on 28 March.

The airline’s LTTS was also revisited taking input from National Treasury as the shareholder department.

The airline has identified R2.2 billion in additional cost savings that it will be targeting in the next 18-24 months. “It consists of labour cost. Over the course of the 90 day period we deeply assessed this business in terms of what is the head count structure like.”

The airline is currently in talks with labour and has looked at a voluntary reduction in early retirements. –
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