1. SAA Overview Presentation to Public Enterprises Portfolio Committee SAA CEO and President; Dr Khaya Ngqula 22 June 2005

2. SAA Overview Bringing the world to Africa, and taking Africa to the world 2 Agenda SAA Business Overview The Bambanani Turnaround Programme SAA Restructuring Exit Plan from Transnet Star Alliance

3. SAA Overview Bringing the world to Africa, and taking Africa to the world 3 Agenda SAA Business Overview The Bambanani Turnaround Programme SAA Restructuring Exit Plan from Transnet Star Alliance

4. SAA Overview Bringing the world to Africa, and taking Africa to the world 4 SAA Business Overview (1/4) Declining yields with the emergence of LCC in Domestic market and strong competition in some European routes Drop in market share especially in domestic market Negative Return on Invested capital Impact of fuel prices and exchange rates in our international markets SAA overall has demonstrated poor operating and financial performance in the past three years The findings by external consultants also indicated that our headcount per flight is not in line with that of other airlines. To continue surviving as an airline we had to do something different

5. SAA Overview Bringing the world to Africa, and taking Africa to the world 5 SAA Business Overview(2/4) 2,150 -4, 035 -12,719 -13,003 FY01/02 FY02/03FY03/04FY04/05 EST Cumulative Net Profit Before Tax for the last three years NPT ( Rm ) 0 2,000 -2,000 -4,000 4,000 -6,000 -8,000 -10,000 -12,000

6. SAA Overview Bringing the world to Africa, and taking Africa to the world 6 SAA Business Overview(3/4) 349 -870 -6,066 FY2002 FY2003 FY20041H FY2005 Operating Profit for the last five years Profit ( Rm ) -2,000 0 -4,000 1,500 -6,000 -8,000 -10,000 FY2001 500 1,000 365 -8,087

7. SAA Overview Bringing the world to Africa, and taking Africa to the world 7 SAA has therefore launched the Bambanani programme, to improve operating and financial performance, and take advantage of market growth, and this include the; –Profit Improvement Programme – focused on unit cost reduction –Sales & Marketing plan – aiming to boost share of premium customers –Customer Service Delivery programme – provide consistent, high quality service throughout the travel experience –Profit focus on all decisions – all strategic decisions based on their impact on contributions (as opposed to market share or revenues alone) SAA Business Overview (4/4)

8. SAA Overview Bringing the world to Africa, and taking Africa to the world 8 Agenda SAA Overview The Bambanani Turnaround Programme SAA Restructuring Exit Plan from Transnet Star Alliance

9. SAA Overview Bringing the world to Africa, and taking Africa to the world 9 Patronage Profit People SAA’s Turnaround Strategy SAA’s turnaround strategy focuses on the three pillars, which refer to our key stakeholders ( People, Customers, and Shareholders )

10. SAA Overview Bringing the world to Africa, and taking Africa to the world 10 The Bambanani Turnaround Programme Launched customer service programme for 11000 employees worldwide Risk Management established  Internal audit  Compliance  Financial Risk  Business Risk People

11. SAA Overview Bringing the world to Africa, and taking Africa to the world 11 The Bambanani Turnaround Programme Re-aligning positions to eliminate duplication throughout the airline. Appointed a new Leadership team that will help drive the turnaround strategy. People

12. SAA Overview Bringing the world to Africa, and taking Africa to the world 12 Looking into our product to ensure consistency in all markets. MOU signed with JET Airways and India for seamless travel experience. The Bambananani Turnaround Programme Patronage

13. SAA Overview Bringing the world to Africa, and taking Africa to the world 13 Reviewing service standards at all touch points in line with that of leading airlines. The process to join STAR is on track to give our customers exposure to Star Alliance Frequent Flyer Programmes. The Bambananani Turnaround Programme Patronage

14. SAA Overview Bringing the world to Africa, and taking Africa to the world 14 The Bambanani Turnaround Programme Cost diagnostics with Mckinsey Launched New Routes all effective July05 o Washington DC o Livingstone o Zanzibar Profit

15. SAA Overview Bringing the world to Africa, and taking Africa to the world 15 The Bambanani Turnaround Programme Move existing international routes to dailies o Zurich/Paris/Sao Paulo/Mumbai o CPT – FRA Application for additional frequencies Accra, Lagos, Luanda Feasibility study on China route Reestablishment of JHB Bangkok route in October05 Profit

16. SAA Overview Bringing the world to Africa, and taking Africa to the world 16 Agenda SAA Overview The Bambanani Turnaround Programme SAA Restructuring Exit Plan from Transnet Star Alliance

17. SAA Overview Bringing the world to Africa, and taking Africa to the world 17 Problems with old organization –Too many direct reports to the CEO –Unclear roles & responsibilities among management team and unclear accountabilities (e.g., fleet planning) –Inefficient structure, e.g., duplication of tasks across organization –Limited focus on core airline business operations –No integrated management of investments and subsidiaries –No alignment of structure along strategy and no link with performance management –From 10 to 7 direct reports to CEO –Clearly defined and delineated roles and responsibilities among ExCo –Organization significantly streamlined based on benchmarking –Dedicated COO to bundle and focus on core airline operations –Management of subsidiaries integrated into core business (e.g., technical) –KPI-based performance contracts designed and tied to strategic objectives of SAA Problems with old organization Improvements in new organization Improvements in the new organization

18. SAA Overview Bringing the world to Africa, and taking Africa to the world 18 SAA Structure Prior to Restructuring Company Secretary CEO Board EVP Human Resources and Transformation EVP Operations and Customer Service EVP Subsidiaries EVP Commercial EVP and CFO EVP SAA Technical VP:Human Resource VP : Legal VP : Treasury VP : Finance VP : Fleet CIO VP: Cargo VP:Marketing VP Alliance, Network & Revenue Management VP:Global Sales VP: Operations VP: Customer Service VP:Global Pax Services & OCC VP:Subsidiaries NB : CSSE - Corporate Safety, Security and Environment VP: Western Cape Business Dev VP : CSSE VP : Comms & Gov Liaison Deputy CEO

19. SAA Overview Bringing the world to Africa, and taking Africa to the world 19 New Management Structure (1/7 ) CEO Level Structure Board CEO CFO CRO General Counsel GM Communication/ Customer Service GM Business Development GM Human Resources Company Secretary COO Changes made in the old structure This structure focuses on effective Governance

20. SAA Overview Bringing the world to Africa, and taking Africa to the world 20 COO Level Structure Head Network, Planning Distribution General Sales Manager Head Marketing Head Passenger Services Head Technical Operation GM Cargo COO CIO Head Safety, Security Environment New Management Structure (2/7 ) This structure focuses on efficient operations

21. SAA Overview Bringing the world to Africa, and taking Africa to the world 21 Our new structure is built upon our guiding principles of Profit, Patronage and People, as –We have created full transparency on roles and responsibilities –We have established clear accountabilities and avoiding duplication of activities/responsibilities –We endeavour to achieve higher efficiency, effectiveness and quality in our work through realigning our functions to our strategy New Management Structure (3/7 )

22. SAA Overview Bringing the world to Africa, and taking Africa to the world 22 Both our customers and people will benefit from the new organization, as –We have consolidated all customer service functions in a dedicated unit to provide consistent excellence in service delivery –We have broken-down functional silos and re-enforce cross-functional processes with clear interfaces and governance bodies to establish process stability for our people New Management Structure (4/7 )

23. SAA Overview Bringing the world to Africa, and taking Africa to the world 23 Excellent performance to drive SAA-growth will be measured and rewarded, as –We are developing our new performance management contracts around Key Performance Indicators, which are linked to driving Profits, Patronage and People initiatives –We will be rewarding our staff for excellence in performance and establish a fact-based system of measuring performance New Management Structure (5/7)

24. SAA Overview Bringing the world to Africa, and taking Africa to the world 24 To increase efficiency and effectiveness we streamline our management levels, as –We have reduced management levels from 7 to 3 to simplify the organization –Get employees close to management and get management closer to customers –We are basing the recognition of individuals more on their roles and responsibilities rather than on their titles New Management Structure (6/7)

25. SAA Overview Bringing the world to Africa, and taking Africa to the world 25 In reinforcing our workforce and realigning our management, we applied the following principles; A Focus on People A Focus on strengthening Risk Management An Aggressive Focus on Customer Service throughout the organisation A culture of excellence with profit and cost control New Management Structure (7/7)

26. SAA Overview Bringing the world to Africa, and taking Africa to the world 26 As part of the Restructuring process, SAA had to introduce Severance Packages ( VSP’s ) for management staff Total Approved : 67 Total Cost : R42 m Approved Severance Packages for Management

27. SAA Overview Bringing the world to Africa, and taking Africa to the world 27 Agenda SAA Overview The Bambanani Turnaround Programme SAA Restructuring Exit Plan from Transnet Star Alliance

28. SAA Overview Bringing the world to Africa, and taking Africa to the world 28 Progress to date Positive competition advisory opinion obtained Draft SAA Bill drafted Legal and tax due diligence completed Pension fund related obligations largely quantified (subject to finalisation by fund actuaries) Financial modeling and preliminary reports of impact of transfer on SAA and Transnet have been completed

29. SAA Overview Bringing the world to Africa, and taking Africa to the world 29 Next steps Transnet/SAA/Public Enterprises Negotiations in relation to:what is to be transferred consideration payable SAA/Transnet/Public Enterprises/National Treasury Consideration of due diligence reports, business case and financial models and implications for proposed transaction Deutsche Bank Finalise the financial evaluation reports on Transnet and SAA Public Enterprises Complete business case analysis for SAA as stand alone SOE Responsibility Action items

30. SAA Overview Bringing the world to Africa, and taking Africa to the world 30 Next steps continued Public Enterprises Commence legislative process (targeting August 2005) Transnet/SAA/SHG/DB Engage with Transnet and SAA lenders required consents/waivers SHG/Public Enterprises/National Treasury Draft PFMA Amendment SHG/Public Enterprises Finalise SAA Bill and supporting documentation Responsibility Action items

31. SAA Overview Bringing the world to Africa, and taking Africa to the world 31 Agenda SAA Overview The Bambanani Turnaround Programme SAA Restructuring Exit Plan from Transnet Star Alliance

32. SAA Overview Bringing the world to Africa, and taking Africa to the world 32 SAA Current Network Sao Paulo New York Atlanta Hong Kong Bombay Perth Mauritius Washington DC Europe : 5 Destinations Africa : 19 Destinations

33. SAA Overview Bringing the world to Africa, and taking Africa to the world 33 Star enables SAA to leverage a global network; revenue benefit is driven by the connecting potential Star generates Key: Star SAA Proposed SAA

34. SAA Overview Bringing the world to Africa, and taking Africa to the world 34 Key Milestones …before joining we still need to Sign the joining documents or the MOU –The MOU has already been signed in December 2004 Competition Implications –SAA’s request for an advisory opinion from the Competition Commission  Becoming bound by the various agreements that define the alliance  Agreeing to comply with certain minimum requirements provided in those agreements

35. SAA Overview Bringing the world to Africa, and taking Africa to the world 35 Key Milestones continued… IT Requirements –The decision to migrate to a new reservation system has implications on migration Pay the joining fee

36. SAA Overview Bringing the world to Africa, and taking Africa to the world 36 Thank You