South African Airways in full activity
Shareholders and BoD committed to turnaround strategy
The board and management of South African Airways are taking urgent steps to address issues raised by the Auditor-General’s office in its 2016-17 audit report, and remains optimistic about the airline’s future.
The AG’s report forms part of SAA’s Integrated report along with financial results for FY2016/2017, which are due to be announced later this month. The airline has incurred a net loss of R5.569 billion (2015/2016: R1,478 billion) and expects that its financial situation will not be much different for FY2017/2018.
However, a number of significant steps have already been taken as part of the turnaround strategy, with the clear aim of taking SAA to profitability in the medium-term.
The five-year plan and strategy require support and funding by the shareholder. The board and the shareholder are currently evaluating the appropriate terms for such support.
The immediate focus of the strategy is on liquidity management, balance sheet restructuring, cost management as well as revenue optimisation, which are intended to stem the losses and drive profitability.
Key steps already taken include:
Improving governance by strengthening the board and its structures.
Injecting R10-billion capital into SAA to improve its balance sheet.
Addressing the leadership vacuum by filling key executive vacancies.
Bringing in a depth of aviation skills by hiring the Chief Restructuring Officer (CRO).
Implementing key market-facing initiatives aimed at stopping ongoing losses.
Furthermore, network optimisation has been implemented on the domestic, regional and international route network to improve yields. The London route will be served by an upgraded product and reduced to a single daily service. These network changes are necessary as SAA’s route network remains under intense scrutiny with clear defined minimum profit margin target at route and network level. A change hub has been setup as command centre for implementation of the change initiatives.
The R10-billion capital injection from National Treasury late last year has helped restructure the balance sheet and improve SAA’s equity position.
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