SAA reduces costs by R1bn

The airline has made good progress towards achieving its restructuring target. This is an initiative the airline started in March last year as part of an effort to ensure its survival and that it becomes profitable on a sustainable basis.

The two biggest restructuring initiatives that have been completed successfully are the grounding of the fleet of Boeing 747s and consultations with labour on standardising and simplifying conditions of employment, with final agreements being put in place.

With these two initiatives together making up more than half of the value of the total restructuring initiatives, the airline is making progress towards achieving sustainable profitability by March 2009.

"We are satisfied that our restructuring efforts have so far shown positive results, even though they were tempered in the past financial year by large restructuring costs," said SAA CEO Khaya Ngqula.

"These are once-off costs and the expectation is that once the restructuring is completed in March 2009, we will be on the path to sustainable profitability. We do, however, need to take cognisance of the recent huge rise in the oil price which has placed margins under pressure across the board," he said.

On the labour side, the organisation has been streamlined and a new, leaner management structuring has been finalised. A total of 963 people took voluntary severance packages and a further 869 people resigned.

As part of the restructuring process, SAA has entered into contracts with a group of managers in an effort to retain the necessary skills and experience to ensure the continuation of core functions within the airline.

SAA has lost many highly skilled people in the past year through resignations which were over and above the severance packages that were offered. These included resignations in areas such as technical, ground staff, cabin crew and management, with management being the single largest category, it said.

SAA has to date contracted with 127 managers and specialists. Managers have to repay these retention premiums should they opt to leave the company before the contract period expires and they have to satisfy the performance expectation and targets, the airline said.

Fleet grounded

The grounding of the fleet of Boeing 747-400s has already brought significant savings to the airline, and will result in a total estimated saving of R600m in the year to end March 2009.

Three of the aircraft have been returned to their lessors, one has been wetleased to Angolan airline TAAG and the remaining two aircraft are in the process of being sub-leased through their owners.

SAA has also made considerable progress in negotiations with its partners serving the southern African route network, SA Express and Airlink. This initiative, which will help increase revenue and reduce costs, is expected to be finalised by mid-year.

Negotiations to reduce distribution costs - ticket booking fees - are close to finalisation, which will potentially save the airline R78m a year.

There is currently a strong focus on improving SAA's operational performance to reduce delays and improve on-time performance. The change-over of ground handlers to Swissport, effective from 1 February 2008, is expected to assist with the process.

SAA said it has already seen a sharp decline in baggage pilferage and although there was an initial increase in the number of bags being left behind due to equipment shortages, this problem has largely been resolved.

- I-Net Bridge