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SA EXPRESS Presentation to the SOE Portfolio Committee 17 June 2009

SA EXPRESS Presentation to the SOE Portfolio Committee 17 June 2009. Contents. Background Airline Categories Route Network Financial Highlights Strategic Focus Financial Projections for FY2009-10 Challenges. Background.

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SA EXPRESS Presentation to the SOE Portfolio Committee 17 June 2009

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  1. SA EXPRESS Presentation to the SOE Portfolio Committee17 June 2009

  2. Contents • Background • Airline Categories • Route Network • Financial Highlights • Strategic Focus • Financial Projections for FY2009-10 • Challenges

  3. 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)

  4. Airline Categories

  5. Current Network LUBUMBASHI MAUN WINDHOEK WALVIS BAY HOEDSPRUIT GABORONE NELSPRUIT Kruger National Park JOHANNESBURG MAPUTO KIMBERLEY RICHAregional divisionS BAY BLOEMFONTEIN DURBAN EAST LONDON CAPE TOWN GEORGE PORT ELIZABETH

  6. Current SAX Fleet: 23 aircraft 12x CRJ200 Ave Age: 8.5yrs 2x Dash 8-Q400 Ave Age: 3.1yrs 2x CRJ700 Ave Age: 7.7yrs 7x Dash 8-300 Ave Age: 14.4yrs

  7. Financial Highlights

  8. www.FIFA.com 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

  9. Financial Highlights Revenue has more than doubled over the last five years Note: FY2008-09 is budget figures

  10. Financial Highlights Operating profit has grown by over R300m over the last 5 years Note: FY2008-09 is budget figures

  11. Financial Highlights SAX became solvent in FY2007-08 and has sustained and improved this status Note: FY2008-09 is budget figures

  12. 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%

  13. 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

  14. 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.

  15. Intra-Africa Hub Strategy • 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.

  16. 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 To JNB

  17. 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

  18. Challenges

  19. Operating Challenges

  20. Economic Challenges

  21. Global perspective

  22. Domestic perspective

  23. Thank you

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