Presentation to Portfolio Committee on Public Enterprises February 2009

1. Presentation to Portfolio Committee on Public Enterprises February 2009

2. Context and agenda • SAA is operationally sound and is still doing well under difficult economic conditions with an operating profit for YTD end January 2009 • This operational performance of SAA will be addressed through: • Airport and Flight operations performance • Restructuring impact • Market performance • Customer service delivery

3. Airport and Flight operations performance Presented by: Chris Smyth Acting CEO

4. SAA’s on-time performance has increased consistently since March 2008 SAA was the best performer in the domestic market for December and January – even better than all LCCs, which are point to point carriers

5. On-time performance is assisted through the increased use of boarding card readers that expedite boarding Flights are closed on time with limited late acceptance of passengers which in turn support on-time departures

6. Baggage handling has improved with a constant decline in mishandled baggage compared to 2007

7. Self check-in and web check-in has improved steadily but showed some decline over the festive season

8. Restructuring performance Presented by: Vera Kriel HOD: Corporate Strategy and Business Planning

9. Background to restructuring: The restructuring plan SAA identified three (3) categories of initiatives in order to achieve most of the turnaround: Global initiatives Revenue initiatives • Point of sale share gap • Pricing actions • 747 elimination • HQ (management) staff reduction • Labour negotiations • Operational performance • improvements • Partner relations SAA restructuring • Cost reduction • Removal of duplication of • functions • Accountability • Contract review Departmental initiatives

10. As on 31 March 2008 the restructuring programme closed at 30m (3%) above target

11. As on 30 December 2008 the restructuring programme was 35% above target which is the full year target for March 2009 of 2.3b

12. Summary performance per area as on 31 December 2008 These targets were achieved through over-delivery on certain initiatives and identifying new initiatives to make up for shortfalls

13. There were some changes to the initial programme based on current realities and achievability • Grounding of B747 • Grounded November 2007 • The sale of the aircraft did not materialised primarily because of changing economic conditions • Mitigating actions were taken by management - TAAG wetlease and Lagos flights • Operational improvements materialised: R177m YTD end December • Partnership relationships negotiations have stalled and were replaced with additional network improvements and codeshare agreements. • GDS contract negotiations were replaced with inter alia reduction in advertising and promotion spend

14. Restructuring Overview: Summary • SAA was fortunate to start the restructuring in a buoyant market • The restructuring plan is above target • The success of the restructuring plan is seen in the operating profit • Restructuring has now become part of operations • In the current economic conditions the principles of restructuring are maintained: strong focus on cost containment, constantly seeking better ways to improve efficiencies and proper contract negotiations

15. Market performance

16. SAA is still performing strong in the markets and routes it has chosen • All SAA’s domestic routes are profitable • Africa is still the most profitable market and SAA’s market share has grown faster than the overall growth, which means that market share was taken from competitors: • Southern Africa traffic has grown by 8%. SAA has grown by 13%, • West Africa traffic has grown by 2%. SAA’s growth was 11% • Central Africa traffic has grown by 31%. SAA grew by 48% • North Africa traffic has grown by 17%. SAA volumes increased by 27% • East Africa traffic has grown by 4%, while SAA passengers have grown by 5% • Market growth of 12% was experienced in Australasia but SAA grew by 19% at the expense mainly of Emirates and Qantas. • South American traffic decreased by 7%. Despite this SAA grew its passenger volumes by 3%, with market share gained from Malaysian Airlines. • SAA has a decrease of 8% in passenger growth given to Delta on the North American market • The South Africa to Asia market has grown by 6% but SAA passengers have declined by 12%. • Traffic from South Africa has declined by 2% overall. SAA passengers growth has declined in line with the grounding of the B747 which took 8% of SAA capacity out of the market SAA will continue to move its capacity to the most profitable markets

17. Customer service delivery

18. Customer satisfaction trends • Customer Satisfaction Surveys: • Customer satisfaction (77%) has increased with 7% • The airport services has shown a considerable improvement of 10%. • On-time performance improved by 26% and this is a contributing factor to increased satisfaction. • The cabin service was rated the most satisfactory service of all with cabin crew showing an increase of 4%. • When asked to indicate the important features for evaluating our services, the customers in all markets indicated that on-time departures is the most important feature for customer satisfaction • Star Alliance CSS Q3/08 • The overall flight satisfaction of SAA with Star Alliance rates at 78%, which is just above the Star Average of 77% • Skytrax 2008 results: • SAA’s business class ranks 11th and economy class 14th globally from 167 airlines • We have retained our number 1 ranking in Africa for the 7th consecutive year

19. Summary • Operational performance is above target • Restructuring has been successful • Market share is growing in our focus areas • Customer satisfaction has started an upward trend • SAA is still on track to make an operational profit by year end • SAA will make a bottom line loss based on: • Decline in revenue in line with economic downturn from December • Interest paid on loans raised against government guarantees • Increase in fuel price to $147 per barrel • Hedging losses because of fuel volatility

20. Thank you