Parliamentary Update 22 October 2002

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Parliamentary Update22 October 2002
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What is SAA today?

• SA brand around the world
• (flies the flag flies the country)
• Extensive network serving business and tourists
• Europe
• Africa
• Expansion
• Largest single carrier of tourists
• Extensive safe reliable service
• Major employer
• SAAs spend
• Foreign currency generator
• Good corporate citizen

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What is SAA today?

• SA brand around the world
• (flies the flag flies the country)
• Extensive network serving business and tourists
• Europe
• Africa
• Expansion
• Largest single carrier of tourists
• Extensive safe reliable service
• Major employer
• SAAs spend
• Foreign currency generator
• Good corporate citizen

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Extensive service
Freq/week
Seats
International Regional Domestic
184 277 1450
56 450 37 390 187 560
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What is SAA today?

• SA brand around the world
• (flies the flag flies the country)
• Extensive network serving business and tourists
• Europe
• Africa
• Expansion
• Largest single carrier of tourists
• Extensive safe reliable service
• Major employer
• SAAs spend
• Foreign currency generator
• Good corporate citizen

6
What is SAA today?

• SA brand around the world
• (flies the flag flies the country)
• Extensive network serving business and tourists
• Europe
• Africa
• Expansion
• Largest single carrier of tourists
• Extensive safe reliable service
• Major employer
• SAAs spend
• Foreign currency generator
• Good corporate citizen

7
SAA contributes value to the South African
economy

• SAA is the biggest carrier of in-bound tourist to
  South Africa
• Total Intl. Revenue pax in 2001 2.3 million
• SAA provides a unique air service for both
  in-bound and out-bound passengers covering 600
  destinations

2001 Financial statement Source SAA Strategy
Planning
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What is SAA today?

• SA brand around the world
• (flies the flag flies the country)
• Extensive network serving business and tourists
• Europe
• Africa
• Expansion
• Largest single carrier of tourists
• Extensive safe reliable service
• Major employer
• SAAs spend
• Foreign currency generator
• Good corporate citizen

9
SAA provides employment to many people in South
Africa

• Direct employment
• ? 10,000 employees
• Salary bill ZAR 2 billion
• Indirect employment
• ? 50,000

Source SAA Strategy Planning
10
SAA generates economic activities for business in
South Africa

• Apron services
• Air Chefs
• Shell, BP and Engen
• Municipalities
• Transtel

• ACSA (Airports Company South Africa)
• Cleaning Services
• LGM

Spend on these entities amounts to ZAR 2.5
billion
Based on 2001 Financial Stetement Source SAA
Strategy Planning
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What is SAA today?

• SA brand around the world
• (flies the flag flies the country)
• Extensive network serving business and tourists
• Europe
• Africa
• Expansion
• Largest single carrier of tourists
• Extensive safe reliable service
• Major employer
• SAAs spend
• Foreign currency generator
• Good corporate citizen

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SAA Supports Business Sport/ Cultural Events

• Sponsorship
• (North Sea Jazz Festival, Cape Argus, Two Oceans,
  SA Woman of the Year, SAA Open etc.)

R150m

• Tourism
• Destination marketing

R130m
Source SAA Communications
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What is SAA today?

• SA brand around the world
• (flies the flag flies the country)
• Extensive network serving business and tourists
• Europe
• Africa
• Expansion
• Largest single carrier of tourists
• Extensive safe reliable service
• Major employer
• SAAs spend
• Foreign currency generator
• Good corporate citizen

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Foreign currency earnings

• SAA generates foreign currency earnings which are
  US based
• Pax ZAR 4.7 billion (R8-1)
• Technical ZAR 390 million (R8-1)
• Repatriated US 70 million

2001 Financial statement Sales
statistics Source SAA Strategy Planning
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What is SAA today?

• SA brand around the world
• (flies the flag flies the country)
• Extensive network serving business and tourists
• Europe
• Africa
• Expansion
• Largest single carrier of tourists
• Extensive safe reliable service
• Major employer
• SAAs spend
• Foreign currency generator
• Good corporate citizen

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SAA is a good corporate citizen

• SAA is a good corporate citizen
• Childrens promise fund ZAR 2 million
• Goodwill in lieu of tickets ZAR 5 million
• Love Life ZAR 2.5 million

Source SAA Strategy Planning
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Financial Highlights

• Turnover increased by 26.1
• Operating cost (excl. leases) increased by 16.3
  
• Lease charges increased by 74.6 from R777M to
  R1,4B
• Taxation charge of R218M
• Headline earnings improves from a loss of R998M
  to a profit of R553M (excl. AC133)
• Bank balances and cash increased from R2.0B to
  R3.9B
• Cashflow from operations increased from R389M to
  R1.9B

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Challenges facing Domestic and International
Tourism and the impact of Public Transportation
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Underlying crisis predates 11th September
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Causes of deepening crisis 2000 to September 2001

• Over-capacity in many markets, especially
  long-haul
• Falling yields due to over capacity and low-cost
  airlines
• Escalation in fuel prices
• Rising labour costs
• Slow down in key economies
• Japan, USA and Germany

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Short-term aftermath of 11th September

• Demand collapses further
• Insurance and security costs shoot up by 600
• ATC charges rising
• Changing fuel prices

Source SAA Insurance Risk Management
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Transformation Challenges
Percentage Breakdown

• Total Employees
• Black 51 (5186)
• White 49 (4884)

• Cabin Crew
• Black 64
• White 36

• Pilots
• Black 3
• White 97

• Management
• Black 15
• White 85

• Technicians
• Black 35
• White 65

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SAAs future core network
Current frequencies/ seats per week
Future frequencies/ seats per week
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Fleet Renewal Strategy
A/C Type
Number
Lease
Purchase
Delivery
41
Option
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Transportation Policy on Aviation

• Niche Player vs A Global Network Carrier
• Niche Player
• Provide domestic service within a particular
  country
• May focus on a particular region within a country
  i.e Emirates, Malaysian Airlines Singapore
  Airlines
• To be successful
• Strong market
• Good alliances that protect the niche player
• Support from the regulators
• High entry barriers

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Transportation Policy on Aviation (cont.)

• A Global Player
• Provides world-wide network of routes and
  destinations i.e. BA, Delta and Lufthansa
• Key Success factors
• Link its own route wide network to a handful of
  Alliance Partners
• Support from the regulatory
• Focus on hub and spoke strategy

Source The Airline business in the 21st century
SAA Strategy Planning
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Challenges for the Airline Industry

• South Africa is a challenging /-10 hours away
  from its key tourist markets
• Coming here for a holiday is a big decision
• How to provide competitive price in the key
  markets as provided by South African Tourism
• As passenger numbers fall, yields and revenue are
  also under pressure
• Linking our efforts together
• Transportation Entities
• Service providers, Hotels, Government,
  Restaurants etc
• Local Authorities
• Regulatory framework
• Growing the number of value added skills in this
  sector

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Challenges for the Airline Industry

• Currency problems
• Pricing
• Hedging 9.5 million barrels / 1.5 billion litres
  per annum
• Cost US10 million
• Currency hedging programs
• Leases
• Loans
• Fuel

12 of cost p.a.
Source SAA Treasury
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Access To South Africa Available Flight
Frequencies From International Markets are not
Currently Fully Utilised
Number of flights Frequencies per Week
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Conclusion

• Key Success Factors
• Stable currency
• Support from all sectors of government
• Service providers to push the Transformation
  agenda
• Coherrent policy on the future of the Aviation
  Industry in South Africa

Thank You