Passenger volumes are up at the national carrier, while output is down, according to the acting chief executive.
Brand South Africa reporter
The implementation of the long-term turnaround strategy at South African Airways (SAA) had seen the airline make real progress, acting CEO Nico Bezuidenhout said today.
“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, although 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].”
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 would create a R100-million benefit for SAA, Bezuidenhout said.
The airline had made capacity adjustments in the domestic market, such as to the Durban-Johannesburg route. These adjustments had freed up capacity that could be used to grow SAA’s African capacity, he said.
Destinations such as Harare, Kinshasa and Mauritius had benefited as a result, and the airline was focused on growing its network revenue into Africa. “On the African side, no other changes are expected in the short and medium term.”
The airline continued 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.
“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 range 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.
“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,” Bezuidenhout said.
In his opinion the reason SAA had failed to implement good plans was 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 was 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.”
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