Things are looking up for SAA - CEO

SAA acting CEO Nico Bezuidenhout.
SAA acting CEO Nico Bezuidenhout.

Johannesburg - The implementation of the long-term turnaround strategy at South African Airways (SAA) has seen the airline make real progress, acting CEO Nico Bezuidenhout said on Tuesday.

"What we've seen in the April and May months, despite market demand being soft, was that SAA has grown its passenger volumes by 6%, with output reduced by 2%," he said.

But he was quick to add that "performance and consequence management has not been traditionally strong" at the airline.

SAA is continuing to implement network changes, with the cancellation of direct flights to Mumbai and Beijing announced earlier this year having a positive effect on the company's finances.

"We are utilising the seats better and selling available seats. We're seeing that across our network, including on the international side, where we are no longer suffering the losses we were [before]."

New routes

SAA has concluded a new code-share agreement with Africa World Airlines, in which four flights a week from Johannesburg will pass through Accra in Ghana and go on to Washington.

Consequently, the Johannesburg-Dhaka-Washington route will be reduced to three times a week, with four direct flights a week from Johannesburg to Dhaka.

The new Johannesburg-Accra-Washington route will create a R100m benefit for the SAA, Bezuidenhout said.

The airline has made capacity adjustments in the domestic market, such as to the Durban-Johannesburg route.

These adjustments have resulted in freeing up capacity that can be used to grow SAA's African capacity, he said.

Destinations such as Harare, Kinshasa and Mauritius have benefited as a result. The airline is focused on growing its network revenue into Africa.

"On the African side, no other changes are expected in the short and medium term."

Headcount

The airline continues to focus on cost reduction two months into the current fiscal year, he said.

"Our costs declined by 14% [which is] in part driven by previous savings on fuel costs. Having said that, fuel costs savings ... would have been negatively impacted by the weakening of the rand," he said.

"We've continued focusing on managing our headcount and we've made good progress on re-engineering [it] overall."

This process is about 50% complete, but Bezuidenhout hopes it will be concluded by September.

The intention is to achieve this without retrenchments as much as possible, through mechanisms such as early retirement. He said SAA should be able to reduce the headcount by 8% to 10%.

"What's not easy is to tell somebody they no longer have a job ... We've tried our utmost to not have a negative impact in that way," he said.

"We have continued employing a process of renegotiating existing supply contracts, that ranges from IT supply to costs of the snacks that you are may be having today [at the news briefing]. All of this is continuing to help us reduce our overall cost bill of 14% for the period," he said.

"Beyond that we continued to focus on the governance of the business, from procurement to policy requirements."

In some cases this resulted in disciplinary action but it was a means of getting the business "watertight".

"It's tough enough to earn a cent in this business and I'm not going to lose it due to underhand practices," he said.

Performance system

In his opinion the reason SAA has failed to implement good plans is because "performance and consequence management has not been traditionally strong. From that stand point, personal performance contracts and robust consequence management becomes very important."

The next step for SAA is to try to get a more rewards-driven performance system in place.

"At Mango, when I'm there, in a given year I earn more than any CEO in the [local] industry - provided that we reach our target. And if we double our target I will get well paid. However, if we don't reach our target, I am the worst-paid CEO in the industry," Bezuidenhout said.

"If we can get something similar back into SAA, no matter how we look at things, human beings are motivated by reward systems."

ZAR/USD
16.97
(+0.36)
ZAR/GBP
21.20
(+0.22)
ZAR/EUR
19.19
(-0.20)
ZAR/AUD
11.84
(-0.04)
ZAR/JPY
0.16
(+0.14)
Gold
1784.58
(+0.54)
Silver
18.27
(+1.50)
Platinum
821.00
(+1.54)
Brent Crude
42.85
(0.00)
Palladium
1931.00
(+1.04)
All Share
54846.28
(+0.60)
Top 40
50503.91
(+0.65)
Financial 15
10134.53
(-0.15)
Industrial 25
76434.98
(-0.16)
Resource 10
51142.00
(+2.00)
All JSE data delayed by at least 15 minutes morningstar logo
Company Snapshot
Voting Booth
Please select an option Oops! Something went wrong, please try again later.
Results
I'm not really directly affected
18% - 1650 votes
I am taking a hit, but should be able to recover in the next year
23% - 2170 votes
My finances have been devastated
34% - 3222 votes
It's still too early to know what the full effect will be
25% - 2345 votes
Vote