SAA hopes to fly again
Johannesburg - South African Airways' (SAA) restructuring strategy is moving rapidly ahead, with a number of key initiatives well underway, SAA CEO Khaya Ngqula said on Friday.
In the current financial year the airline plans to focus on the restructuring plan in the hope of returning the airline to profitability.
In the 2006 financial year it reported a loss of R883m, after a small profit of R65m the year before, as operating costs, many of which are beyond SAA's control, soared 13.4% to R21.3bn.
The losses in the second half of the year slowed and were in the region of R200m - as a consequence of some of the initiatives put in place, the airline said.
The main contributors to the higher operating costs were a 7.8% rise in the dollar/rand exchange rate, a 12.3% hike in the Brent fuel price, a jump in aircraft lease rental and an ongoing increase in the broader cost structure of SAA.
Ngqula said with costs rising above revenue, it became evident that a fundamental restructuring of the airline was required.
Reaping the benefits
He added that other global airlines have restructured their finances and operations and are now reaping the benefits, with many returning to profitability.
"SAA found itself behind the restructuring curve and we moved decisively to implement a turnaround plan that will see the airline return to profitability within 18 months," he added.
The restructuring plan was approved by the Board in May and publicly launched on June 4.
The plan revolves around group-wide operational, revenue improvement and cost cutting initiatives to achieve an EBIT margin of 7.5% in the next 12 to 18 months. To this end the key financial focus areas will be to reduce and contain operating costs and margin and yield enhancements.
SAA said it would require a further recapitalisation in order to cover the once off costs of the structure and turnaround strategy, which it says will be "substantial".
To date, SAA has grounded its fleet of B747-400s and put its fleet upgrade on hold, with the fleet unlikely to grow for the next 12 to 18 months. The first of the B747-400s is to be returned in early July and the first "balloon payment" of R168m was made on June 27.
Key growth area
The plan also includes SAA's network, with the airline having identified Africa as a key growth area. It plans to concentrate its network schedule design on how to best serve its African markets.
On the international front, SAA plans to focus on those routes that are profitable while curtailing unprofitable ones. To this end the Paris route will stop flying by the end of October. New routes to be introduced include Munich from July 3 and Libreville from mid-September.
Low cost carrier competition was addressed by the launch of Mango in November. SAA said Mango had experienced good growth since its launch, capturing around 10% of the domestic market.
In the next few weeks the low cost carrier will fly its one-millionth passenger. No financials were disclosed for Mango, as is the practice among many low cost carriers.
Ngqula said from an organisational point of view, the management structure of SAA has been redesigned to ensure that general managers are directly responsible for implementing the restructuring initiative.
Consultations are taking place with managers across the board to ensure SAA has the skills and expertise to take the airline through the restructuring process. New conditions of employment are being negotiated with all employees.
Ngqula concluded by saying: "There can be no turning back from restructuring, as it is clear it is the only way to ensure that SAA not only survives, but becomes profitable."
Article from http://www.fin24.co.za/
On the road again with www.southafrica-carhire.com
In the current financial year the airline plans to focus on the restructuring plan in the hope of returning the airline to profitability.
In the 2006 financial year it reported a loss of R883m, after a small profit of R65m the year before, as operating costs, many of which are beyond SAA's control, soared 13.4% to R21.3bn.
The losses in the second half of the year slowed and were in the region of R200m - as a consequence of some of the initiatives put in place, the airline said.
The main contributors to the higher operating costs were a 7.8% rise in the dollar/rand exchange rate, a 12.3% hike in the Brent fuel price, a jump in aircraft lease rental and an ongoing increase in the broader cost structure of SAA.
Ngqula said with costs rising above revenue, it became evident that a fundamental restructuring of the airline was required.
Reaping the benefits
He added that other global airlines have restructured their finances and operations and are now reaping the benefits, with many returning to profitability.
"SAA found itself behind the restructuring curve and we moved decisively to implement a turnaround plan that will see the airline return to profitability within 18 months," he added.
The restructuring plan was approved by the Board in May and publicly launched on June 4.
The plan revolves around group-wide operational, revenue improvement and cost cutting initiatives to achieve an EBIT margin of 7.5% in the next 12 to 18 months. To this end the key financial focus areas will be to reduce and contain operating costs and margin and yield enhancements.
SAA said it would require a further recapitalisation in order to cover the once off costs of the structure and turnaround strategy, which it says will be "substantial".
To date, SAA has grounded its fleet of B747-400s and put its fleet upgrade on hold, with the fleet unlikely to grow for the next 12 to 18 months. The first of the B747-400s is to be returned in early July and the first "balloon payment" of R168m was made on June 27.
Key growth area
The plan also includes SAA's network, with the airline having identified Africa as a key growth area. It plans to concentrate its network schedule design on how to best serve its African markets.
On the international front, SAA plans to focus on those routes that are profitable while curtailing unprofitable ones. To this end the Paris route will stop flying by the end of October. New routes to be introduced include Munich from July 3 and Libreville from mid-September.
Low cost carrier competition was addressed by the launch of Mango in November. SAA said Mango had experienced good growth since its launch, capturing around 10% of the domestic market.
In the next few weeks the low cost carrier will fly its one-millionth passenger. No financials were disclosed for Mango, as is the practice among many low cost carriers.
Ngqula said from an organisational point of view, the management structure of SAA has been redesigned to ensure that general managers are directly responsible for implementing the restructuring initiative.
Consultations are taking place with managers across the board to ensure SAA has the skills and expertise to take the airline through the restructuring process. New conditions of employment are being negotiated with all employees.
Ngqula concluded by saying: "There can be no turning back from restructuring, as it is clear it is the only way to ensure that SAA not only survives, but becomes profitable."
Article from http://www.fin24.co.za/
On the road again with www.southafrica-carhire.com
Labels: South Africa - Airlines
