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

2. 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

3. 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 R posted 30 March 2009
31 March R posted 9 March 2010
31 March R posted July 2010 R
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

4. 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

5. 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

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

7. 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”

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

9. 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

10. Impact of Remedial Actions Per Annum

11. Impact of Remedial Actions
Detail
Amount
Reducing capacity to improve load factor
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

12. Schedule Mandate to drive the passenger revenue budget
Tentative operational cost saving
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 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

13. 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

14. 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

15. Phase Two - Overview

16. 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

17. 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