parliamentary update 22 october 2002
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Parliamentary Update 22 October 2002. 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 - PowerPoint PPT PresentationTRANSCRIPT
Parliamentary UpdateParliamentary Update22 October 200222 October 2002
Parliamentary Update 22 Oct 2002 2
What is SAA today?What is SAA today?What is SAA today?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• SAA’s spend• Foreign currency generator• Good corporate citizen
Parliamentary Update 22 Oct 2002 3
What is SAA today?What is SAA today?What is SAA today?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• SAA’s spend• Foreign currency generator• Good corporate citizen
Parliamentary Update 22 Oct 2002 4
Extensive serviceExtensive serviceExtensive serviceExtensive service
International
Regional
Domestic
184
277
1450
56 450
37 390
187 560
Freq/week Seats
Parliamentary Update 22 Oct 2002 5
What is SAA today?What is SAA today?What is SAA today?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• SAA’s spend• Foreign currency generator• Good corporate citizen
Parliamentary Update 22 Oct 2002 6
What is SAA today?What is SAA today?What is SAA today?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• SAA’s spend• Foreign currency generator• Good corporate citizen
Parliamentary Update 22 Oct 2002 7
• SAA is the biggest carrier of in-bound tourist to South AfricaTotal 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
SAA contributes value to the SAA contributes value to the South African economySouth African economy
SAA contributes value to the SAA contributes value to the South African economySouth African economy
Parliamentary Update 22 Oct 2002 8
What is SAA today?What is SAA today?What is SAA today?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• SAA’s spend• Foreign currency generator• Good corporate citizen
Parliamentary Update 22 Oct 2002 9
SAA provides employment to many people SAA provides employment to many people in South Africain South Africa
SAA provides employment to many people SAA provides employment to many people in South Africain South Africa
•Direct employment 10,000
employeesSalary bill ZAR 2
billion
•Indirect employment 50,000
Source: SAA Strategy & Planning
•Uniforms•Direct servicing SAA•ACSA•Air Chefs•Apron services•Transnet
-IA-Treasury-Transtel
•Auditors•ATNS•Aircraft cleaning•Security
Parliamentary Update 22 Oct 2002 10
SAA generates economic activities for SAA generates economic activities for business in South Africabusiness in South Africa
SAA generates economic activities for SAA generates economic activities for business in South Africabusiness in South Africa
• Apron services
• Air Chefs
• Shell, BP and Engen
• Municipalities
• Transtel
*Based on 2001 Financial Stetement
Source: SAA Strategy & Planning
Spend on these entities amounts to Spend on these entities amounts to ZAR 2.5 billion*ZAR 2.5 billion*
• ACSA (Airports Company South Africa)
• Cleaning Services
• LGM
Parliamentary Update 22 Oct 2002 11
What is SAA today?What is SAA today?What is SAA today?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• SAA’s spend• Foreign currency generator• Good corporate citizen
Parliamentary Update 22 Oct 2002 12
SAA Supports Business & Sport/ SAA Supports Business & Sport/ Cultural EventsCultural Events
SAA Supports Business & Sport/ SAA Supports Business & Sport/ Cultural EventsCultural Events
• Sponsorship - (North Sea Jazz Festival, Cape Argus,
Two Oceans, SA Woman of the Year, SAA Open etc.)
R150m
• Tourism- Destination marketing
R130m
• Cadet Pilots (since inception) R100m
• Lounges R60m
Source: SAA Communications
Parliamentary Update 22 Oct 2002 13
What is SAA today?What is SAA today?What is SAA today?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• SAA’s spend• Foreign currency generator• Good corporate citizen
Parliamentary Update 22 Oct 2002 14
• 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
Foreign currency earningsForeign currency earningsForeign currency earningsForeign currency earnings
Parliamentary Update 22 Oct 2002 15
What is SAA today?What is SAA today?What is SAA today?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• SAA’s spend• Foreign currency generator• Good corporate citizen
SAA's value to SA Economy 16
• SAA is a good corporate citizen
- Children’s promise fund ZAR 2 million
- Goodwill in lieu of tickets ZAR 5 million
- Love Life ZAR 2.5 million
Source: SAA Strategy & Planning
SAA is a good corporate citizenSAA is a good corporate citizenSAA is a good corporate citizenSAA is a good corporate citizen
Parliamentary Update 22 Oct 2002 17
• 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
Financial HighlightsFinancial Highlights
Parliamentary Update 22 Oct 2002 18
Challenges facing Domestic and
International Tourism and the
impact of Public Transportation
Parliamentary Update 22 Oct 2002 19
Underlying crisis predates
11th September
Parliamentary Update 22 Oct 2002 20
• 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
Causes of deepening crisis Causes of deepening crisis 2000 to September 20012000 to September 2001
Causes of deepening crisis Causes of deepening crisis 2000 to September 20012000 to September 2001
Parliamentary Update 22 Oct 2002 21
• Demand collapses further
• Insurance and security costs shoot up by 600%
• ATC charges rising
• Changing fuel prices
Short-term aftermath of 11th September
Short-term aftermath of 11th September
Source: SAA Insurance & Risk Management
SAA's value to SA Economy 22
Transformation ChallengesTransformation Challenges
Management:- Black15%- White 85%
Technicians:- Black35%- White 65%
Cabin Crew:- Black64%- White 36%
Pilots:- Black 3%- White 97%
Total Employees:- Black 51% (5186)- White 49% (4884)
Percentage Breakdown:
SAA Update Durban Indaba 14 May 23
SAA’s future core networkSAA’s future core networkCurrent frequencies/
seats per weekFuture frequencies/
seats per weekFreq. Seats Total Freq. Seats Total
ATL 4 350 1,400 ATL 7 350 2,450 CPT-ATL 3 350 1,050 JFK 7 350 2,450 JFK 4 350 1,400 LHR 7 350 2,450 LHR 13 320 4,160 LHR 6 280 1,680 CPT-LHR 7 320 2,240 CPT-LHR 7 340 2,380 ZRH/CDG 7 330 2,310 ZRH 7 240 1,680 FRA 7 355 2,485 CDG 3 240 720 BKK 3 270 810 FRA 7 350 2,450 HKG 4 290 1,160 HKG 7 340 2,380 PER 4 290 1,160 PER 5 240 1,200 GRU 3 290 870 GRU 5 240 1,200 BOM 4 178 712 BOM 3 240 720 growth
19,757 21,760 10.1%
SAA Results and Strategy 23 July 2002 24*Option*Option
A/C Type Number Lease Purchase Delivery
Fleet Renewal StrategyFleet Renewal Strategy
A340-600 3 - 1Q2003
A340-600 3 1 2 4Q2003
A340-600 1 - 3Q2003
A340-600 2 * - 2005
A340-300e 2 - 1Q2004
A340-300e 3 - 1Q2005
A319-100 11 - 2005/6
A320-200 15 2010/11/1241
A340-300e 1 - 2Q2004
Parliamentary Update 22 Oct 2002 25
Transportation Policy on AviationTransportation 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
Parliamentary Update 22 Oct 2002 26
Transportation Policy on Aviation (cont.)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 21Source: The Airline business in the 21stst century; SAA Strategy & Planning century; SAA Strategy & Planning
Parliamentary Update 22 Oct 2002 27
Challenges for the Airline IndustryChallenges 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
Parliamentary Update 22 Oct 2002 28
Challenges for the Airline IndustryChallenges for the Airline Industry
• Currency problems- Pricing
Hedging 9.5 million barrels / 1.5 billion litres per annum
Cost US$10 million
- Currency hedging programsLeasesLoansFuel
12% of cost p.a.
Source: SAA TreasurySource: SAA Treasury
Parliamentary Update 22 Oct 2002 29
42
64
192
94
10 14
122
12
48
23
84
111103
0
50
100
150
USA UK WesternEurope
Asia Australia SouthAmerica
Africa
Available Currently Used
Access To South AfricaAvailable Flight Frequencies From International Markets
are not Currently Fully Utilised
Access To South AfricaAvailable Flight Frequencies From International Markets
are not Currently Fully UtilisedN
um
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flig
hts
Fre
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s pe
r W
eek
Parliamentary Update 22 Oct 2002 30
ConclusionConclusion
• 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