South African Airways 2006 Annual Report

LABOUR AND PUBLIC ENTERPRISES SELECT COMMITTEE
31 October 2006
SOUTH AFRICAN AIRWAYS 2006 ANNUAL REPORT

Chairperson: Ms M Themba (ANC, Mpumalanga)

Documents handed out:
SAA Presentation to Select Committee on Labour and Public Enterprises, October 2006
South African Airways (SAA) Summary of Annual Report for 2006

SUMMARY
South African Airways presented a summary of its Annual Report for 2006. The key issues focused on were the income statements and strategies, namely the new low cost carrier (Mango) and the unbundling from Transnet. The presentation also focused on the impact of the recent strike on the company’s reputation and profit margins.

The main issues raised in the discussion dealt with the need for improved customer service, consideration of the disabled and previously disadvantaged and the implications of unbundling from Transnet. The Committee agreed that the company had to improve its capacity and should work together with the Committee to overcome the challenges it faces.

MINUTES

South African Airways (SAA) Presentation

Mr G Griffiths (Chief Financial Officer) dealt with issues around SAA’s highlights for the year, income statement, balance sheet, cash flow statement, the impact of the recent strike and financial risk management. He focused on the impact of the strike and stated that SAA has been trying to regain passengers’ respect.

Mr K Ngqula (Chief Executive Officer) spoke about the key themes in Africa, the key themes in South Africa, the strategic overview, network overview, achievements, network plans, highlights and key initiatives and product improvements. The main focus of this part of the presentation was improving customer services, implementing network strategies, growth and recapitalisation and finalising the unbundling process from Transnet.

Discussion

The Chair asked what opportunities for training and employment were offered by SAA and whether it was promoting awareness of the aviation industry in rural areas and among the previously disadvantaged.

Ms J O’Sullivan (Corporate Affairs Manager) replied that SAA has a cadet training programme where every year previously disadvantaged people are brought into the programme, but there is room for improvement. To enhance education and awareness of the aviation industry, the Vulundela mobile platform goes to the rural areas to show children who have never seen an aircraft what they look like and they use black pilots to inform children what they had to do to become pilots.
 
Ms J Terblanche (DA, North-West) raised her concerns about the quality of customer services by asking what SAA was doing about overbooked flights and long queues.

Mr Ngqula replied that SAA is recruiting more staff to deal with long queues. They are in the process of trying to employ staff with a tertiary education. He noted that this process was going to take time.

The Chair suggested that staff be deployed to assist with the queues as the “fast” queues are not efficient.

Ms Terblanche asked whether the new low-cost airline (Mango) is going to operate the same way as Kulula and 1Time.

Mr Ngqula said Mango would be completely separate from SAA. It would compete for passengers with SAA and SAA would not be involved in the day-to-day operation of Mango as required by the Competition Commission.

Mr D Mkono (ANC, Eastern Cape) stated that he liked the SAA slogan “Bringing the World to Africa and taking Africa to the World” and commended SAA for the presentation. He had the following questions: Is SAA training pilots from disadvantaged backgrounds, especially women? Will there be an airlink between Umtata and Johannesburg? He raised his concerns about Nigerian Airlines. Mr Mkono asked whether SAA is learning from the safety challenges faced in Nigeria. With regard to sport, he asked whether SAA had programmes to assist local people?

Mr Ngqula responded that SAA is flying the national tennis, football and golf players, as a profit making initiative. Sport can be seen as a development programme as it helps the disadvantaged.

Mr N Hendricks (UIF) had the following questions: How will SAA recapitalise? When will cost cutting mechanisms come into effect? How is SAA going to improve customer service especially for 2010? What implications has unbundling from Transnet had for SAA? He noted that the cost for the new flights is very low and wondered how SAA would make a profit in the midst of high fuel costs. He asked whether the profit would come from the number of passengers and if so, why this strategy wad not been implemented before.

Mr Ngqula stated that previously Transnet was a middleman between the Minister of Public Enterprises and SAA; now SAA deals directly with the Minster if there is a problem. From a business point of view, this move was good as bureaucracy has been cut to ensure more efficiency.

In response to unbundling, Mr Griffiths said SAA is not going to issue more ordinary shares. He noted that SAA is looking at performance shares.

Ms S Mabe (ANC, Free State) stated that the presentation was very enlightening. Her concern regarded staff development for 2010. She noted that the little things matter; especially at the front desk when customers make their bookings or try to change their tickets. If South African citizens find it challenging to change their tickets; how about tourists who are not familiar with South Africa? Ms Mabe also asked for the difference between SAA, SAA Express SAA Airlink. What are SAA’s plans for Bloemfontein because there are not enough flights on that route?

The Chair stated that the service is sometimes terrible and very slow. She asked whether the staff get continuous re-training to know that customers contribute to their salaries. In addition she wanted to know what staff development mechanisms SAA have in place. Ms Themba also asked why SAA does not show local or African movies on their flights.

Mr Ngqula said that he would get back to the Committee about showing African movies. He noted that SAA has tried to provide local music on the flights.

Mr Mkono asked what Parliament could do about the lack of announcements at airports; especially Johannesburg (O R Tambo International).

Ms O’Sullivan responded that the silent airport policy was due to customer demand; it has been adopted in Asia and some European countries. SAA needs to have better communication with its customers. If SAA has sufficient staff, the problems of overbooking and long queues would be solved. SAA does not have enough qualified check in staff and had to invest in more personnel.

Mr Khoahli (Department of Public Enterprises) stated that people should be treated equally. Making announcements can be viewed as informing customers and a customer service initiative. He suggested that the Committee and SAA should focus on disabled customers.

The Chair thanked SAA for the presentation and discussion and said the Committee looked forward to working closely with SAA and would check if there is progress next year.

The meeting was adjourned.