SA EXPRESS Presentation to the SOE Portfolio Committee
17 June 2009
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Contents• Background • Airline Categories• Route Network• Financial Highlights • Strategic Focus• Financial Projections for FY2009-10• Challenges
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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)
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Airline Categories
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HOEDSPRUIT
NELSPRUITKruger National Park
MAPUTO
RICHAregional divisionS BAY
DURBAN
EAST LONDON
PORT ELIZABETH
KIMBERLEY
MAUN
GABORONE
LUBUMBASHI
WALVIS BAYWINDHOEK
CAPE TOWNGEORGE
JOHANNESBURG
BLOEMFONTEIN
Current Network
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Current SAX Fleet: 23 aircraft12x CRJ200
Ave Age: 8.5yrs
2x CRJ700Ave Age: 7.7yrs
7x Dash 8-300Ave Age: 14.4yrs
2x Dash 8-Q400Ave Age: 3.1yrs
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Financial Highlights
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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
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Financial HighlightsRevenue has more than doubled over the last five years
0
200
400
600
800
1000
1200
1400
1600
1800
FY2004-05 FY2005-06 FY2006-07 FY2007-08 FY2008-09
Note: FY2008-09 is budget figures
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Financial HighlightsOperating profit has grown by over R300m over the last 5 years
Note: FY2008-09 is budget figures
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Financial Highlights SAX became solvent in FY2007-08 and has sustained and
improved this status
Note: FY2008-09 is budget figures
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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%
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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
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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.
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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
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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 JNBTo JNB
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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 3rd 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
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Challenges
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Operating Challenges
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Economic Challenges
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Global perspective
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Domestic perspective
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Thank you