Parliamentary Update 22 October 2002

1. Parliamentary Update22 October 2002

2. What is SAA today? • SA brand around the world • (flies the flag & flies the country) • Extensive network serving business and tourists • Europe • Africa • Expansion • Largest single carrier of tourists • Extensive safe & reliable service • Major employer • SAA’s spend • Foreign currency generator • Good corporate citizen Parliamentary Update 22 Oct 2002

3. What is SAA today? • SA brand around the world • (flies the flag & flies the country) • Extensive network serving business and tourists • Europe • Africa • Expansion • Largest single carrier of tourists • Extensive safe & reliable service • Major employer • SAA’s spend • Foreign currency generator • Good corporate citizen Parliamentary Update 22 Oct 2002

4. Extensive service Freq/week Seats International Regional Domestic 184 277 1450 56 450 37 390 187 560 Parliamentary Update 22 Oct 2002

5. What is SAA today? • SA brand around the world • (flies the flag & flies the country) • Extensive network serving business and tourists • Europe • Africa • Expansion • Largest single carrier of tourists • Extensive safe & reliable service • Major employer • SAA’s spend • Foreign currency generator • Good corporate citizen Parliamentary Update 22 Oct 2002

6. What is SAA today? • SA brand around the world • (flies the flag & flies the country) • Extensive network serving business and tourists • Europe • Africa • Expansion • Largest single carrier of tourists • Extensive safe & reliable service • Major employer • SAA’s spend • Foreign currency generator • Good corporate citizen Parliamentary Update 22 Oct 2002

7. SAA contributes value to the South African economy • SAA is the biggest carrier of in-bound tourist to South Africa • Total Intl. Revenue pax in 2001 = 2.3 million* • SAA provides a unique air service for both in-bound and out-bound passengers covering 600 destinations Parliamentary Update 22 Oct 2002 *2001 Financial statement Source: SAA Strategy & Planning

8. What is SAA today? • SA brand around the world • (flies the flag & flies the country) • Extensive network serving business and tourists • Europe • Africa • Expansion • Largest single carrier of tourists • Extensive safe & reliable service • Major employer • SAA’s spend • Foreign currency generator • Good corporate citizen Parliamentary Update 22 Oct 2002

9. Uniforms • Direct servicing SAA • ACSA • Air Chefs • Apron services • Transnet • IA • Treasury • Transtel • Auditors • ATNS • Aircraft cleaning • Security SAA provides employment to many people in South Africa • Direct employment •  10,000 employees • Salary bill ZAR 2 billion • Indirect employment •  50,000 Parliamentary Update 22 Oct 2002 Source: SAA Strategy & Planning

10. SAA generates economic activities for business in South Africa • Apron services • Air Chefs • Shell, BP and Engen • Municipalities • Transtel • ACSA (Airports Company South Africa) • Cleaning Services • LGM Spend on these entities amounts to ZAR 2.5 billion* *Based on 2001 Financial Stetement Source: SAA Strategy & Planning Parliamentary Update 22 Oct 2002

11. What is SAA today? • SA brand around the world • (flies the flag & flies the country) • Extensive network serving business and tourists • Europe • Africa • Expansion • Largest single carrier of tourists • Extensive safe & reliable service • Major employer • SAA’s spend • Foreign currency generator • Good corporate citizen Parliamentary Update 22 Oct 2002

12. Cadet Pilots (since inception) R100m • Lounges R60m SAA Supports Business & Sport/ Cultural Events • Sponsorship • (North Sea Jazz Festival, Cape Argus, Two Oceans, SA Woman of the Year, SAA Open etc.) R150m • Tourism • Destination marketing R130m Source: SAA Communications Parliamentary Update 22 Oct 2002

13. What is SAA today? • SA brand around the world • (flies the flag & flies the country) • Extensive network serving business and tourists • Europe • Africa • Expansion • Largest single carrier of tourists • Extensive safe & reliable service • Major employer • SAA’s spend • Foreign currency generator • Good corporate citizen Parliamentary Update 22 Oct 2002

14. Foreign currency earnings • SAA generates foreign currency earnings which are US$ based • Pax ZAR 4.7 billion (R8-$1) • Technical ZAR 390 million (R8-$1) • Repatriated US$ 70 million *2001 Financial statement **Sales statistics Source: SAA Strategy & Planning Parliamentary Update 22 Oct 2002

15. What is SAA today? • SA brand around the world • (flies the flag & flies the country) • Extensive network serving business and tourists • Europe • Africa • Expansion • Largest single carrier of tourists • Extensive safe & reliable service • Major employer • SAA’s spend • Foreign currency generator • Good corporate citizen Parliamentary Update 22 Oct 2002

16. SAA is a good corporate citizen • SAA is a good corporate citizen • Children’s promise fund ZAR 2 million • Goodwill in lieu of tickets ZAR 5 million • Love Life ZAR 2.5 million SAA's value to SA Economy Source: SAA Strategy & Planning

17. Turnover increased by 26.1% Operating cost (excl. leases) increased by 16.3% Lease charges increased by 74.6% from R777M to R1,4B Taxation charge of R218M Headline earnings improves from a loss of R998M to a profit of R553M (excl. AC133) Bank balances and cash increased from R2.0B to R3.9B Cashflow from operations increased from R389M to R1.9B Financial Highlights Parliamentary Update 22 Oct 2002

18. Challenges facing Domestic and International Tourism and the impact of Public Transportation Parliamentary Update 22 Oct 2002

19. Underlying crisis predates 11th September Parliamentary Update 22 Oct 2002

20. Causes of deepening crisis 2000 to September 2001 • Over-capacity in many markets, especially long-haul • Falling yields due to over capacity and low-cost airlines • Escalation in fuel prices • Rising labour costs • Slow down in key economies • Japan, USA and Germany Parliamentary Update 22 Oct 2002

21. Short-term aftermath of 11th September • Demand collapses further • Insurance and security costs shoot up by 600% • ATC charges rising • Changing fuel prices Parliamentary Update 22 Oct 2002 Source: SAA Insurance & Risk Management

22. Transformation Challenges Percentage Breakdown: • Total Employees: • Black 51% (5186) • White 49% (4884) • Pilots: • Black 3% • White 97% • Cabin Crew: • Black 64% • White 36% • Management: • Black 15% • White 85% • Technicians: • Black 35% • White 65% SAA's value to SA Economy

23. SAA’s future core network Current frequencies/ seats per week Future frequencies/ seats per week SAA Update Durban Indaba 14 May

24. A340-600 3 -  1Q2003 • A340-600 1  - 3Q2003 • A340-600 3 1 2 4Q2003 • A340-600 2 * - 2005 • A340-300e 2  - 1Q2004 • A340-300e • A340-300e 3 1   - - 1Q2005 2Q2004 • A319-100 11  - 2005/6 • A320-200 15   2010/11/12 Fleet Renewal Strategy A/C Type Number Lease Purchase Delivery 41 SAA Results and Strategy 23 July 2002 *Option

25. Transportation Policy on Aviation • Niche Player vs A Global Network Carrier • Niche Player • Provide domestic service within a particular country • May focus on a particular region within a country i.e Emirates, Malaysian Airlines & Singapore Airlines • To be successful • Strong market • Good alliances that protect the niche player • Support from the regulators • High entry barriers Parliamentary Update 22 Oct 2002

26. Transportation Policy on Aviation (cont.) • A Global Player • Provides world-wide network of routes and destinations i.e. BA, Delta and Lufthansa • Key Success factors • Link its own route wide network to a handful of Alliance Partners • Support from the regulatory • Focus on hub and spoke strategy Parliamentary Update 22 Oct 2002 Source: The Airline business in the 21st century; SAA Strategy & Planning

27. Challenges for the Airline Industry • South Africa is a challenging +/-10 hours away from its key tourist markets • Coming here for a holiday is a big decision • How to provide competitive price in the key markets as provided by South African Tourism • As passenger numbers fall, yields and revenue are also under pressure • Linking our efforts together • Transportation Entities • Service providers, Hotels, Government, Restaurants etc • Local Authorities • Regulatory framework • Growing the number of value added skills in this sector Parliamentary Update 22 Oct 2002

28. Challenges for the Airline Industry • Currency problems • Pricing • Hedging 9.5 million barrels / 1.5 billion litres per annum • Cost US$10 million • Currency hedging programs • Leases • Loans • Fuel 12% of cost p.a. Parliamentary Update 22 Oct 2002 Source: SAA Treasury

29. Access To South Africa Available Flight Frequencies From International Markets are not Currently Fully Utilised Number of flights Frequencies per Week Parliamentary Update 22 Oct 2002

30. Conclusion • Key Success Factors • Stable currency • Support from all sectors of government • Service providers to push the Transformation agenda • Coherrent policy on the future of the Aviation Industry in South Africa Thank You Parliamentary Update 22 Oct 2002