SAA Restructuring: Department of Public Enterprises briefing.
NCOP Public Enterprises and Communication
11 September 2007
Meeting Summary
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Meeting report
LABOUR AND PUBLIC ENTERPRISES SELECT COMMITTEE
11 September 2007
SAA RESTRUCTURING: DEPARTMENT OF PUBLIC ENTERPRISES BRIEFING.
Chairperson: Ms M Temba (ANC – Mpumalanga)
Documents handed out:
Department of
Public Enterprises Presentation
Audio recording of
meeting
SUMMARY
The Department of Public Enterprises briefed the Committee on the
monitoring of South African Airways (SAA) restructuring. The Department
explained that it had adopted the Seabury transformation strategy, which had
been successful in
restructuring airlines that were in a similar situation as SAA.
Members were concerned about SAA’s restructuring process as it would lead to a
great loss of skills. Members raised questions about whether there was any trade
union involvement in the labour negotiation processes, and whether or not the labour negotiations would
affect the quality of SAA’s service. Members also stated that they were
concerned with the overbooking of flights at SAA, and the reduction of the number
of 747’s.
MINUTES
Department of Public Enterprises (DPE) Presentation
Mr Andrew Shaw, DPE’s Deputy Director General: Transport, outlined the Seabury
transformation strategy, SAA’s profitability bridge, the DPE’s monitoring
mechanisms and the key risks and consequences of the restructuring. The global initiatives of the Seabury strategy was to assist with the
elimination of the 747’s, the staff reduction at SAA’s headquarters and the
improvement of SAA’s operational performance. The strategy would also assist
with cost reduction and the removal of duplication of functions. DPE hoped to
monitor the process through monthly reporting where issues of performance and
the progress of the main restructuring initiatives would be highlighted. The
minutes of the board and sub-committee meetings would also be provided to DPE.
The key risks and consequences of the process would include an increase in
competition from Emirates Airlines and uncertainties such as the high oil
prices.
Discussion
Ms J Terblanche (DA) [North West] asked for clarity with regard to the
overbooking of flights at SAA and whether or not the labour negotiations would
affect the quality of service. It should also be noted that the lack of service
from the SAA staff was of great concern.
Mr Shaw replied that he could not speak on behalf of SAA. It should be noted
however that the quality of service needed to be improved, and SAA was working
on a number of initiatives. SAA was a company that was faced with many challenges
and the issue of overbooking was a worldwide phenomenon that was not unique to
SAA alone. The plan was to maximize the amount of passengers moved, and sometimes
this would lead to the overbooking of seats. The matter should be taken up with
SAA for further clarity.
Ms N Ntwanambi (ANC) [Western Cape] stated that she too was concerned about the
overbooking of flights and stated that SAA should have been presenting to the
Committee instead of DPE’s Deputy Director General. The Committee would also like
to be provided with more information on the monthly reports and the reduction
of staff after the negations had taken place. It should also be noted that the
Committee would not accept the fact that they could not be given figures on SAA
staff reduction. Clarity should also be provided on the reduction of managers, removal
of the duplication of functions, the reduction of the 747’s and the returns
that were yielded by sponsorships.
Mr Shaw replied that SAA was at a challenging time and it should be noted that
when it came to the staff reductions, it was the better skilled staff that left
SAA. It should also be noted that SAA was seen to be historically overstaffed
for an airline company its size. SAA’s cost base was also generally seen to be
30% higher than its competitors. Part of the Seabury task was to look at the
SAA organogram and determine whether there was scope and efficiency, hence the resultant
reduction in managers. With regard to the sponsorships, DPE believed that there
needed to be a cut back on the sponsorships, and areas in which company could
yield the best returns needed to be determined. However, there were certain
types of sponsorships which were built into contracts that would be very costly
to get rid of.
Mr j Sibiya (ANC) [Limpopo] asked for clarity on what
became of decommissioned aircrafts and the DPE initiatives aimed at ensuring
accountability. Comment should be provided on SAA’s partner relationships and
how they would help in improving its revenue flow. The issue of overbooking was
of great concern as it was increasingly becoming a common occurrence.
Mr Shaw replied that in terms of the reduction of the number of 747’s, SAA saw
itself as a global carrier which provided intercontinental services. It should
be noted that both the airline industry and the aircrafts have adjusted, which
has therefore made the 747’s outdated. The high maintenance cost of the 747’s
was also a huge factor in the decommissioning of the airline. SAA had also
reduced a number of international routes and would be using smaller and more
efficient aircrafts such as the Airbus. Part of the challenge in the reduction
of the 747’s was the training of pilots, as they would have to be retrained to
fly the new aircrafts. With regard to the partnerships it should be noted that
SAA was continuously working with various airlines. In terms of accountability,
it should be noted that accountability was quite low and could be greatly
improved.
The Chairperson stated that the Committee was entitled to the information that
was provided in the monthly reports. It should be noted that the staff at SAA
were worried about the restructuring process, and DPE should provide clarity on
whether there was any trade union involvement. Clarity must also be provided on
DPE’s representatives on the board.
Mr Shaw replied that in terms of board representation, DPE did not have any
board representation. It merely played an oversight role. It should be noted
however that DPE had a much greater relationship with SAA compared to all the
other state owned enterprises. With
regard to the reports DPE did not include the reports because it did not want
to create a situation where SAA’s commercial operations were exposed. However, as the restructuring process moved
forward, SAA would be at liberty to divulge more information. With regard to
the loss of skills during the restructuring process, the SAA staff
have a high chance of getting work in the airline industry. DPE however
could not comment on the issue of the trade unions, and it would await the
final outcome. Even though SAA was currently cutting back on staff, there were a
number of key skilled positions that still needed to be filled in order to take
the airline forward.
Ms Terblanche stated that the tax payers have always bailed out SAA in the
past. DPE should state whether privatization would be a possibility, if the
restructuring process were to fail.
Mr Shaw responded that it was true that SAA had been bailed out before; however
the restructuring process would be different from the previous attempts. DPE
was looking at a process which would be monitored on a regular basis. However when
it came to privitisation, one needed to look at the industry and determine who
would take on an airline such as SAA under the conditions that it was facing. DPE
was focused on making the restructuring process work.
Ms S Chen (DA) [Gauteng] stated that the issue of restructuring was a
management problem.
The Chairperson stated that the Committee would soon be embarking on an
oversight visit to SAA. DPE should comment on the issue of baggage loss and
whether the baggage owners were notified when the bags were found. Clarity
should also be provided on how SAA could be saved.
Mr Shaw responded that the baggage issue was to be raised with the Airports Company
Authority of South Africa (ACSA) and SAA. It has however been reported that the
situation had improved. With regard to taking SAA forward, DPE’s main objective
was to focus on the issues that had been raised by the Seabury process and try
to find a way forward. It should be
noted that the process had been successful in restructuring airlines that were
in a similar situation. They should be
given credit for the involvement in the restructuring processes and their
engagement with SAA on key issues.
The meeting was adjourned.
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