SAA plans to save R900m through staff cuts

LOSS-making national airline South African Airways (SAA) is looking to save more than R900m over three years through staff reductions under discussion with trade unions.

It is part of a multi-pronged cost-cutting plan to save R2.2bn in the next three years. It would be in addition to the 17% unit cost reduction over the past three years.

The savings aim to ensure a R1.3bn improvement in earnings before interest, tax, depreciation and amortisation in the 2015-16 financial year and positive earnings before interest and tax in the 2017-18 financial year.

Details of the cost-saving measures emerged from SAA’s corporate plan, dated June 23, sent to Parliament this week. It highlights rising competition domestically and on the continent.

Since 2013, when SAA adopted its long-term turnaround plan, competition had become “even tougher and our financial performance and position has further deteriorated”, the document reads.

The corporate plan notes SAA plans to cut its “excessive” workforce by 10.5% in the next three months. Union Solidarity’s negotiator Derek Mans said about 700 employees from SAA and SAA Technical — the aircraft maintenance and repair company — were targeted. Consultations, facilitated by the Commission for Conciliation, Mediation and Arbitration, were at an early stage, he said.

SAA wants to complete the staff restructuring by the end of September.

In 2013-14, the airline spent R5.3bn on salaries and employee benefits. Through its three-year corporate plan, SAA wants to achieve and maintain the commercial sustainability of the airline by enhancing revenue, reducing costs and improving performance management, which, it says, remains weak.

Other initiatives include the implementation of a new network and fleet plan, which is projected to generate improvements of R2.5bn in annualised earnings in the next three years. Earnings improvements of R440m were achieved under the 90-day action plan, which ended in March.

SAA cut costs by R453m in the 2013-14 financial year and by R1bn the previous year. It made a R2.6bn loss (R1.2bn the previous year) in 2013-14 on a total income of R30bn (R27bn). The plans assume a resolution of the feeder airline model and of the 2002 order of Airbus A320 aircraft. SAA wants to cancel the remaining 10 A320s, set for delivery in 2016 and 2017, and replace them with five Airbus A330 aircraft for medium-haul flights.

It wants to extend the existing A340 leases for about six years.

Also under consideration, is a review of feeder options for Mango; the expansion of SA Technical on the continent; and a joint-venture management model for Air Chefs. – BDLive