Portfolio Committee – February 2012 Feedback loop Portfolio Committee – February 2012 This document is confidential and circulation is restricted

Content of Feedback loop Investigation Update 2013 and Beyond – Strategic Framework "Never doubt that a handful of committed people can change the world. Indeed, it is the only thing that ever has. - Margaret Mead

Investigation – Previously reported R42m VAT balance – this balance reported under trade receivables had to be reconciled, post reconciliation it was discovered that the balance relate to opening balance adjustments (audited), if reversed this will be adjusted to retained earnings to the period it relates to, however full reconciliations need to be conducted. 31 March 2008 R11 737 311.31 posted 30 March 2009 31 March 2009 R 6 619 346.95 posted 9 March 2010 31 March 2010 R 14 130 109.14 posted July 2010 R 32 486 767.40 R16m debtors query – this revenue query relates the 2006/7 and 2007/8 financial year, if a dispute resolution is followed and the debtor is determined irrecoverable it will be written off during the current financial year alternatively if this was raised in error it has to be adjusted to the period in which the debtor has been raised. Discussions are underway with SAA

Investigation - Update Sizwe Ntsaluba Gobodo was appointed by the board to investigate the allegations Forensic Report was submitted to the board upon conclusion of the engagement Internal Disciplinary procedures underway Disciplinary enquiries postponed to enable the board to gather more information than that presented in the forensic audit report Feedback will be provided once board is in the position to share the information The board has resolved to withdraw the AFS which will have an impact on previous AFS

Restatement of Financial Statements for FY2011, 2010, 2009 In summary, SA Express has identified weaknesses in oversight of controls as the major problem and therefore: The reviewing of the financials, inclusive of all accounts/balances; and does not just correct the two known errors KPMG has been deployed to review and audit the accounting policies and practices Reviewing skills, resources, processes and systems to ensure that these errors do not reoccur The project is in progress and continuos updates will be provided This process may result in further financial restatements and findings

Above and Beyond Turbulence Strategy 2013 This document is confidential and circulation is restricted

Responding to the Current Turbulence A phased Strategy Phase 1 – Short term actions to immediate problem – “navigating through turbulence” Phase 2 – Medium to long term to ensure sustainable business – “above and beyond turbulence”

Phase 1 Strategy in Action - “In the Black” is our Goal Restatement of AFS Cost saving at the core of the business Engagement actions

Restatement of Financial Statements for FY2011, 2010, 2009 KPMG has been deployed to review and audit the accounting policies and practices Reviewing skills, resources, processes and systems to ensure that these errors do not reoccur Reviewing internal audit function and audit plans Review of procurement function and system capability

Impact of Remedial Actions Per Annum

Impact of Remedial Actions Detail Amount Reducing capacity to improve load factor 149.350 Opening a Durban base 15.10 Negotiate SAA contracts down 5.49 Employment Freeze where necessary 3.50 Cost Conservation Management 16.80 Improve maintenance planning 5.20 TOTAL ANNUAL SAVINGS BY MAR 2013 197.34 Approximately a savings of R98m by September 2012

Schedule Mandate to drive the passenger revenue budget Tentative operational cost saving achieved @70% Cost Saving Target R149m p.a Schedule reduced to 20 Self-healing / Optimal Schedule Reduced night stops DUR Base Increase utilisation Reduced current schedule to 18- 2 Aircraft for DUR expansion, 2 SISA, 1 maintenance 30-40 minute turn-around time Maintenance swop opportunities: CR 2 and Q4 – daily, CR7 –every second day All aircraft to base, JNB-DUR(maintenance flight cancelled) DUR base optimised – Jet base Average of 10 hours blocktime weekdays

Background to reduction of Schedule 89% of Revenue is absorbed by Direct Cost, this is a 20% increase over the last two years Unit Costs has to be reduced

Graphical impact of reduced Schedule Reduction of Unit Cost will reduce the absorption of direct cost from 89% to 72% This reduction of 12% should enable the company to regain sustainable profits

Phase Two - Overview

Phase Two - Purpose Phase 2 Phase 1 To consolidate and embed Business cost/efficiency improvement initiatives To consolidate Business Processes and Internal Controls - and drive deep into the business To strengthen Stakeholder Relationships

SA Express Vision Statement: A sustainable, integrated, regional airline connecting secondary and main airports Rule No. 1 of the Obama administration. “Never allow a crisis to go to waste” Thank You