Tag Archive | Mango

SAA turnaround plan involves flight changes

A strategy that can be achieved…..

SAAMonwabisi Kalawe, the newly appointed CEO of SAA, told parliamentarians that that the new long term strategy for SAA, four months in the making, “is within the reach of SAA and that a turnaround in the fortunes of the national airline can be achieved.” His subject was the SAA annual report, Minister Gigaba having introduced him and endorsing the turnaround plan.

Noting that the twenty year long-term turnaround strategy (LTTS) had no financial figures attached, a fact questioned by MPs a number of times, Kalawe responded with the reply, “Since we are still deep in discussions with national treasury and matters relating to guarantees and estimates of cost, it would be both ill advised and premature to discuss numbers. We are still in the middle of a bid to recover the balance sheet.”

Public Enterprises “comfortable”

Both the new CEO and the plan itself were introduced by the minister of public enterprises, Malusi Gigaba, together with the chairperson of SAA, Duduzile Myeni, both of whom said they were also “comfortable” with the plan.

The strategy plan, Kalawe said, had been drawn up in time to meet an April 2013 deadline in production and was approved by cabinet in August. MPs noted that in the last few years, no less than nine strategic plans for SAA had been presented to Parliament costing many millions of rands.

The consensus of opinion from MPs was that SAA’s new plan looked hopeful, particularly bearing in mind that no less than seven outside groups had been used in this round of consultations and other international airlines had also been contacted for opinion.

New routes on flight plans

The minister said he had instructed that a “new route network had to be designed and that SAA’s procurement programme had to be re-thought out. An “Africa” strategy had to be evolved, fully cognisant of the facts that the airlines market was characterised by low margins, constantly increasing fuel costs and changing geo-politics.”

“There has to be a turnaround in the fortunes and profitability of SAA and any strategy had to be a holistic document that is both aimed at developmental needs and financial accountability to the shareholders”, the minister concluded.

Kalawe said that on analysis SAA had an “impeccable safety record” and that technical needs of SAA were to be contracted out to Denel and that this would allow that state body to build its services throughout Africa.   He said that an assessment of SAA had indicated at present high cost factors running the airline that were intolerable; “a sub optimal capital structure” and he described the airline as having been run on a “value destructive business model”.

Re-branding on the way

“South Africa”, he continued, “was a long way from market centres and there had been a failure in the past to recognise the geographic situation”.  A new group would be formed to handle the SAA brand and information technology, updated to compete properly in the international market, Kalawe told parliamentarians.

Savings of R100m this year would be effected, he said, and a complete review of all non profitable routes debated with government departments to establish what was necessary in the national interest and what could be discontinued. Emphasis would be on developing cargo carrying in Africa, localised regional sub-Saharan traffic. Mango would open a service to Zanzibar.

Voyager to be tackled

Kalawe noted that the new LTTS would focus on a sustainable economic future for SAA and said, “We have set up a body that will track the implementation of our strategic plan”.  He said the Voyager customer service division was undergoing major changes with various customer improvement, aviation being a key developer in the National Economic Plan, supplying as it did some 35,000 jobs and R6.8m to GDP.

The financial controller of SAA admitted there had been too much “ad-hockery” in the past with regard to decisions on routes, “with an ambassador always somewhere in the globe calling for an SAA service to their area”.

Three in one

From now on, Kalawe promised MPs, there would be on-going focus on cost efficiency and the creation of an integrated group by combining SAA itself; Mango as a low-cost carrier; and SA Express as a regional operator; all into one cohesive unit serving the globe and particularly Africa. “However, it could take us well into next year to sort out both the business, loan and legal implications of such a move”, he concluded.

Minister Gigaba finally noted that a “re-worked route network” would be completed in stages over the next twelve years, having established priorities with government policy but the next stage was to satisfy Treasury with a long term and sustainable budget before any major capital injections would be considered.

Neither party would be drawn into any form of discussion on such costs.

Refer previous articles in this category

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