Report to Select Committee on Monitoring

1
Report to Select Committee on Monitoring of
SAAs Restructuring - 10 September 2007
2
Summary
The Problem The Seabury Transformation
Strategy Profitability Bridge Projected
Profitability Monitoring by DPE/Treasury Summary
of Restructuring Progress Responsibilities for
Restructuring Initiatives Top 10 Initiatives
Update Highlights SAA Actual Results to 31 July
2007 Key Risks and Consequences
3
The Problem
Profit (Loss) before Tax Gap
Minimum of ZAR 2.7 billion improvement needed
4
The Seabury Transformation Strategy
Revenue initiatives
Global initiatives

• 747 elimination
• HQ staff reduction
• Operational performance
• improvements
• Partner relations

• Point of sale share gap
• Pricing actions

SAA restructuring

• Cost reduction
• Removal of duplication of
• functions
• Accountability
• Contract review
• Labour concessions

Departmental initiatives
5
Profitability Bridge
Profitability Bridge
ZAR millions
ZAR 2.7 billion
6
Projected Profitability
After restructuring, the Transformation Plan
provides targeted profitability
Profit-Before-Tax Comparison
7
Monitoring by DPE/Treasury

• Inter departmental co-ordination
• Monthly restructuring SAA reporting format agreed
  highlighting
• Performance
• Progress of main restructuring initiatives
• Monthly reports to DPE and National Treasury
• Meetings June, July and August
• Monthly meetings scheduled
• September, October and November
• Board sub-committee minutes provided to
  shareholder

8
Summary of Restructuring Progress
Benefit realisation is largely on-track
over recovery of benefits on some initiatives
making up for initiatives that are behind
schedule
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Responsibilities for Restructuring Initiatives
Ongoing Must be delivered Annualised
during 07/08 Improvement financial
year __________________R million______________
_______ HR 786 207 Operations
258 124 Finance 796
625 SAAT 217 72 Cargo 21
10 Commercial 623 199 Total
2,700 1,236
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Top 10 Initiatives Update
Description Annualised Saving Timing SAA Status
Labour - management 62 Nov 07 Yellow
Labour - gap 62 Jan 08 Green
B747 grounding 62 Aug 07 Yellow
Regional partnership revenues 17 Mar 08 Red
GDS contract renegotiation 17 Sep 07 Green
Advertising and promotions 16 Jun 07 Blue
Market share revenue gap - Europe and domestic 16 Jan 08 Green
Additional revenue in lieu of sponsorships 16 Jun 07 Yellow
Engine renegotiations 5 Nov 07 Green
Operational performance 5 Mar 08 Green
Top 10 initiatives 82 of full restructuring 100

Completed Blue
On track Green
On track but issues to be addressed Yellow
Behind or unable to generate monetary value Red
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Highlight SAA Actual Results to 31 July 2007

• Operating results ahead of budget
• Revenues better than expected
• Costs contained
• Slippage in timeframe of expected labour related
  savings

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Key Risks and Consequences

• Additional competition from Emirates
• Expect revenue impact once Emirates commence
  services
• Uncertainties
• Worldwide credit market crisis
• High oil prices
• Labour concessions