The SAA: A Case Study Of South African Airlines

Introduction

SAA is a State-owned company, reporting to the Minister of Public Enterprises as supported by the Department of Public Enterprises (DPE). The airline’s principal activities include providing scheduled air services for the transportation of passengers, freight and mail to international, regional and domestic destinations.

In February 1934 the South African government took over Union Airways and renamed the airline South African Airways (SAA).

In November 1934 SAA introduced on its domestic flights the first multi engine aircraft, the Junkers JU 52/3m. During the 30’s the airline steadily increased its fleet with more Junkers and with DC3’s, DC7’s, Constellations, and Vickers Viscounts.

In 1940, with the start of World War II, SAA

This scenario, coupled with a highly competitive global environment from airline companies like Comair in the domestic market, Kenya Airways and Ethiopia in the regional and African market and the likes of Air France-KLM, BA, Quantas, Emirates and Delta in the international long haul routes, could weaken SAA’s strength, strong market position, its access to capital and big customer base, therefore the organization has no choice but to restructure it’s strategy to reduce costs and improve service

The strategy might have started to produce successful results because according to Moneyweb (October 2012) the airline made a small loss in 2008 and from 2009 to 2011 it earned profits of R442m, R665m and R671m respectively and by March 2010 the cash balance was R3.4 bn. When Siza Mzimela took charge of SAA, her team developed a new growth strategy which saw the introduction of new routes in a very difficult economic environment. This diversion from the original strategy resulted in the airline returning to its old habits of making colossal losses.

In March 2013, SAA’s Board approved a Long-Term Turnaround Strategy (LTTS) which according to Public Enterprises Minister Malusi Gigaba, it was designed to address operational and financial challenges faced by SAA, which had reported cumulative losses of around R14 bn over the past few years.

According to SAA Group Integrated Annual Report 2014, the Long-Term Turnaround Strategy was built on three key pillars that support strategic objectives in order to drive business sustainability and achieving economic, social and environmental objectives. See Figure 1 below: Figure 1: SAA’s LTTS Presentation to Select Committee on Labour and Public Enterprises (February 2014)

The five levers on which SAA’s strategy hinges are:

• Achieve and maintain commercial