South African Airways enabler for tourism and driver of economic growth

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The FINANCIAL — South African Airways (SAA), the South African National Flag Carrier, has a specific and important role to play as an enabler for tourism and a driver of economic growth through trade. The movement of people and goods by air is more important than ever before.

Nico Bezuidenhout, SAA’s Acting Chief Executive, emphasised at the Durban Tourism Indaba SAA’s continued support of the economy and tourism through the effort the airline has made in bringing stability by implementing its 90-Day Action Plan, according to South African Airways.

“Tourism has always been and remains an important catalyst for growth in South Africa. It supports one in every 12 jobs in South Africa (SA) either directly or indirectly,” said Bezuidenhout.

The SAA Group supports tourism through an integrated offering. SAA, is a Skytrax four-star rated domestic, continental and inter-continental airline; Mango, the Group’s Low Cost Carrier (LCC), one of the most successful LCCs on the continent, profitably serving primarily domestic routes and Zanzibar. Voyager, Africa’s leading airline loyalty programme; SAA Cargo; Air Chefs, its catering arm; and South African Airways Technical, the leading FAA-accredited maintenance facility in Africa.

“Tourism numbers are staggering. The Oxford Economics study estimates that approximately 615 000 people are directly employed by the tourism industry while a further 451 000 jobs are indirectly linked to the sector and 312 000 people are directly supported through the household spend of tourism workers.

“It is no surprise that Tourism is one of the six key drivers of the SA 2011 National Growth Path Framework. It is a key sector for growth and from a tourism baseline of R 189.4 billion in 2009, the contribution of tourism to South African GDP is expected to exceed R 500 billion over the next decade,” said Bezuidenhout.

“The numbers sound appealing, forecasts rosy and bullish. So while the merits of forums such as Indaba is undeniable, and it is clear that a general responsibility befalls our Industry, it is for this reason, that the Board of SAA late last year approved the 90-Day Action Plan. It was not a quick fix plan, but rather, an instrument to return the business to a stable point for full implementation of the Long-Term Turnaround Strategy,” said Bezuidenhout.

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In March this year, SAA successfully completed the plan and the company has achieved significant milestones during that time. Loss making routes such as Mumbai and Beijing were culled but, as important sources of tourism, SAA expanded its code reach in these source-markets, now providing more than 10 points in India alone through codeshare operations. SAA’s new service into the United Arab Emirates delivers a presence in one of the busiest air hubs in the world with forecasts indicating that beyond the stemming of losses in our business, the actual potential for growth in tourism through this move is exceptional.

Going forward the focus is less in culling routes and more in growing from a stable base and platform.  SAA plans to grow capability to better connect South Africa with its key Trade and Tourism partners. By achieving business stability and continually being mindful of managing costs, a strong foundation is set to gear for growth in a measured way.

The top five priorities for SAA over the coming six months are:

1. Implementation of its route network and fleet plan, as already accelerated through the 90-Day Action Plan. Over time an airline stands the risk of inadvertently injecting inefficiencies into its network plan. Following an extensive study of the current plan, SAA has found that there is a wide range of improvement opportunities identified, with a projected positive impact of R 2,5 billion in annualized earnings. This will significantly curb losses and position the airline for future growth.

SAA will also continue to focus on partnerships. No airline is able to service every route with its own aircraft and, through effective partnerships and code-sharing, SAA’s reach will continue to grow, as was the case with our expanded middle-Eastern operations adding 26 additional destinations and source-markets to the SAA network.

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2. The next area of focus will be Revenue Gain: This includes addressing several Commercial areas, including much tighter revenue management as well as developing a new distribution strategy where SAA closely embrace and leverage Travel Agency and TMC partners.  To optimally cast SAA’s revenue-net and claw back past inefficiencies, a cohesive approach is required which will see SAA’s internal efforts supported by aligned marketing and communication activities, using powerful  owned channels such as Voyager, to effectively communicate its value proposition.

3. Cost Compression remains a key focus area.  The business will continue to seek optimized efficiencies throughout every aspect of the company.  Ongoing savings initiatives will be implemented without compromising the quality and reliability of product.  In this regard in excess of R2bn in initiatives have been quantified, ranging from labour cost management through to supply-chain re-engineering.   Growing the revenue line whilst simultaneously managing cost down, not through a programme but through instilling a particular cost-conscious culture, is the quickest and most sustainable way of ensuring sustainable bottom-line results.

4. Strengthening of governance, risk management and optimization of the Group structure represents the next areas of emphasis, where matters are to be  addressed such as how do the Group companies inter-relate to each other, how is each one set-up to best service its chosen markets and do we have a best-practice control environment that pro-actively manages the inherent risk present within an Aviation Group; 

5. A clear drive towards performance excellence, notably within the Human Capital arena, completes the near-term area of focus. Beyond the performance excellence envisaged for the SAA business as a whole, this translates into individual accountability.


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