1. SA EXPRESS Presentation to the SOE Portfolio Committee 17 June 2009

2. Slide 2 Contents Background Airline Categories Route Network Financial Highlights Strategic Focus Financial Projections for FY2009-10 Challenges

3. Slide 3 Background South African Express (SAX) was established in 1994 as a regional feeder airline to South African Airways SAX operates predominantly on routes that are secondary within South Africa and the region, e.g. Bloemfontein, Kimberley, Richards Bay, George and Gaborone, Botswana. These routes cannot be served viably with larger aircraft The majority of SAX customers (75%) are business travellers commuting between major hubs and secondary routes (the Hub-and- Spoke system)

4. Slide 4 Airline Categories Legacy carriers operating from primary hubs Weighed down by high costs due to high labor costs and hub inefficiencies Enjoy revenue premium driven by network and service product advantages Mainline network carriers (e.g. SAA) Single class service with minimal frills No hubs or interlining of traffic High productivity of aircraft, labor and facilities Low Cost Carriers (e.g. kulula) Feed mainline carriers at their hubs Operate point to point service in less dense markets May be independent or partially spun off from mainline parent Regional Carriers (e.g. SAX)

5. Slide 5 HOEDSPRUIT NELSPRUIT Kruger National Park MAPUTO RICHAregional divisionS BAY DURBAN EAST LONDON PORT ELIZABETH KIMBERLEY MAUN GABORONE LUBUMBASHI WALVIS BAY WINDHOEK CAPE TOWN GEORGE JOHANNESBURG BLOEMFONTEIN Current Network

6. Slide 6 Current SAX Fleet: 23 aircraft 12x CRJ200 Ave Age: 8.5yrs 2x CRJ700 Ave Age: 7.7yrs 7x Dash 8-300 Ave Age: 14.4yrs 2x Dash 8-Q400 Ave Age: 3.1yrs

7. Slide 7 Financial Highlights

8. Slide 8 Highlights of FY2008-09 Won the “Overall Q400 Reliability Performance Award” for the Q400 aircraft type from Bombardier IOSA accreditation leading to full IATA membership SA Express acquired 2x CRJ 700 (70 seat) Awarded contract to carry all the teams domestically during the FIFA Confederation Cup www.FIFA.com

9. Slide 9 Financial Highlights Revenue has more than doubled over the last five years Note: FY2008-09 is budget figures

10. Slide 10 Financial Highlights Operating profit has grown by over R300m over the last 5 years Note: FY2008-09 is budget figures

11. Slide 11 Financial Highlights SAX became solvent in FY2007-08 and has sustained and improved this status Note: FY2008-09 is budget figures

12. Slide 12 Balance Sheet Performance On target to increase the total assets by over 30% compared to last year Positive Net asset value On target to reduce liabilities by over 50%

13. Slide 13 Strategic Focus Short-Term Goals Consolidate presence in domestic secondary markets Implement the DRC opportunity Develop human capital Build a sustainable cargo business Continue to improve efficiencies Long-Term Goals Fully establish the intra- Africa hub strategy Improve the Retention Strategy and Talent Management Plan Be the employer of choice in the aviation sector Reposition the South African Express brand

14. Slide 14 Regional Expansion Strategy Opportunities exist for SAX to establish hubs, in Central Africa, East Africa and West Africa The strategy to play a major role in the region has been attempted by other airlines, but has been unsuccessful for following reasons:  Aircraft too large to operate profitably in developing these new routes (not enough feeder market into hub)  Fear of dominance  Inadequate frequency out of hubs if larger aircraft are utilised SAX core business has for the last 15 years been to service secondary markets. Experience has shown that frequency and right capacity are key to opening secondary markets.

15. Slide 15 In partnership with other African carriers and non airline entities SAX aims to:  Serve the regional local markets  Provide intra-continental daily connectivity  Concentrate intercontinental traffic at hubs to provide better connectivity Benefit to other African carriers:  Increased revenue from stimulated markets  Lower costs from sharing maintenance, systems, aircraft etc. In partnership with other African carriers and non airline entities SAX aims to:  Serve the regional local markets  Provide intra-continental daily connectivity  Concentrate intercontinental traffic at hubs to provide better connectivity Benefit to other African carriers:  Increased revenue from stimulated markets  Lower costs from sharing maintenance, systems, aircraft etc. Intra-Africa Hub Strategy

16. Slide 16 DRC opportunity  SAX currently operates the route between Johannesburg and Lubumbashi, and has identified the opportunity to extend its operation within the DRC, in joint venture with a local partner  The airline plans to extend its operation to Kinshasa as follows:  JNB – FBM – FIH – FBM – JNB  SAX had already received an in- principle PFMA approval in 2008 and is now waiting final approval  SAX currently operates the route between Johannesburg and Lubumbashi, and has identified the opportunity to extend its operation within the DRC, in joint venture with a local partner  The airline plans to extend its operation to Kinshasa as follows:  JNB – FBM – FIH – FBM – JNB  SAX had already received an in- principle PFMA approval in 2008 and is now waiting final approval To JNB

17. Slide 17 FY2009-10 Budget Highlights and Assumptions Increase turnover by 15% – Increase net contribution from cargo revenue by up to 80% – Increase capacity on major SAX routes (e.g. BFN, KIM, etc.) – Implement the regional expansion strategy in the DRC – Grow 3 rd party maintenance Increase profit by 6% Contain costs as per FY2008-09, excluding exposure to volatile markets – Continue to focus on reducing administration costs by adopting low- cost principles Increase capital investments by 8% Note: Financial assumptions prior to Economic meltdown

18. Slide 18 Challenges

19. Slide 19 Operating Challenges Operating Challenges in Africa Restrictive Air Bilateral Agreements Market instability Legislative differences Lack of skilled resources Ease of doing business Poor infrastructure

20. Slide 20 Economic Challenges Declining yields in business markets Consumer Protection Bill Increased LCC competition in non hub- to-hub market Instability in oil prices Fluctuations in US:ZAR rate Domestic Recession

21. Slide 21 Global perspective Impact of the global recession US$ 10.4 Billion in airline losses in 2009 15% Revenue decline in 2009 African airlines to lose about $500 million Airline Mergers 8% drop in passenger numbers Average of 17% drop in cargo traffic

22. Slide 22 Domestic perspective Industry Challenges High inflation eroding consumer disposable income Decreasing passenger figures Slowing Economy Decreasing Corporate travel spend Positive global economic signs, strengthening oil prices

23. Slide 23 Thank you