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South African Airways successfully concludes restructuring

South African Airways successfully concludes restructuring

JOHANNESBURG. 02 June 2009. South African Airways (SAA) has successfully completed its restructuring programme, a process resulting in cost savings of R2,5-billion which has ensured that the airline is operationally sound and capable of weathering the current economic storm. SAA started its deep and fundamental restructuring in March 2007, and this came to an end in March this year. The restructuring process set out with initiatives in three categories which included global initiatives, revenue initiatives and departmental initiatives.

“The restructuring was largely successful with most initiatives having surpassed their targets and the overall net profit impact having exceeded target by 8% at the end of the restructuring programme,” says Chris Smyth, SAA Acting CEO.

Key initiatives included a 30% reduction in management numbers and overall head count, labour negotiations resulting in a three-year wage agreement, operational performance improvements as well as the grounding and successful return of three Boeing 747 aircraft. Revenue initiatives included effective yield management with departmental initiatives including cost reductions, removal of duplication in a range of areas, improved performance measurement and the review of contracts.

“Much work has been done to ensure that the management of costs are an entrenched part of our financial processes going forward. It is critical that we ensure the gains we have made under restructuring are sustainable. We will continue to fully monitor these as well as concentrate on growing revenue and improving efficiencies. The removal of R2,5-billion in costs from the organisation was a significant achievement,” says Smyth.

However, Smyth warns that hedging losses and hundreds of millions of rands in interest payments on the debt book will have a negative impact on net profitability for 2008-09. The grounding of SAA’s fleet of Boeing 747 aircraft was one of the key restructuring initiatives. A total of three Boeing 747 aircraft were grounded and returned under normal lease expiry conditions. Mitigating strategies were introduced to reduce costs on the remaining three aircraft, and these were rotated to support SAA’s operations on profitable routes as well as a wetleasing arrangement with another airline.

A particularly successful aspect of the restructuring was SAA’s improved operational performance, with improved on-time performance and baggage handling. Airport operations, especially at OR Tambo International in Johannesburg have also been significantly improved.

“We have a wonderful brand and going forward we will build on our proud history of being the foremost airline on the African continent with 75 years of experience. Along with the rest of the word, we are currently dealing with a major economic downturn which is affecting businesses across the board. However, we can count ourselves very lucky to have undertaken and completed the restructuring programme timeously. And the challenge now is to ensure that it is sustainable going forward,” says Smyth.

Going forward, SAA will concentrate its business on its mission of being an African airline with global reach. “We will continue to add to our African route network and move capacity from those non-performing areas to enable us to grow routes that are performing well.

“Our aim is to ensure the future sustainability of our restructuring achievements. We have vastly improved customer service and operationally the airline is sound,” says Smyth.

Issued by SAA Group Corporate Affairs

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