Report of the Portfolio Committee on Public Enterprises on the oversight visit to South African Express Airways, dated 18 February 2015

Public Enterprises

Report of the Portfolio Committee on Public Enterprises on the oversight visit to South African Express Airways, dated 18 February 2015
 

1. INTRODUCTION

 

The Portfolio Committee on Public Enterprises undertook an oversight visit to South African Express Airways on 26 November 2014. The purpose of the oversight visit was to familiarise the Committee with the business of South African Express Airways in terms of operations, challenges, and the conditions of workers and customers. The Committee visited the SAX head offices at Airways Park in Johannesburg, and met with the board and executive management of SAX, led by the Chairperson, Mr Andile Mabizela, and the Chief Executive, Mr Inathi Ntshanga. The Committee undertook a tour on the facilities which included the training academy, check-in counters at OR Tambo International Airport and an interaction with the unions and customers.

 

This report provides an overview of the visit, observations and recommendations.

 

2. COMPOSITION OF THE DELEGATION

 

The multiparty delegation consisted of the following Members:

 

Portfolio Committee on Public Enterprises:

• Ms Dipuo Letsatsi-Duba (Committee Chairperson – ANC)
• Dr Zukile Luyenge (ANC)
• Ms Zukiswa Rantho  (ANC)
• Mr Moses Tseli  (ANC)
• Mr Eric Marais (DA)
• Mr Nqabayomzi Kwankwa (UDM)

 

Committee Support Staff:

• Mr Disang Mocumi, Committee Secretary
• Ms Lee Bramwell, Researcher
• Mr Rodney Mnisi, Content Advisor
• Ms Yoliswa Landu, Principal Communication Officer
• Ms Yandiswa Cele, Committee Assistant

 

 

3.         VISIT TO SOUTH AFRICAN EXPRESS AIRWAYS

 

The Committee started the oversight visit with a site visit to the check-in counters at OR Tambo International Airport, where members of the Committee interacted with front-line staff and customers to understand the challenges that they experience. These were some of the findings from the walk-about at the airport:

 

3.1        Interaction with front-line staff and customers

 

These were the findings of the Committee from the interaction with front-line staff and customers: 

• SAA and SA Express used the same staff and check-in counters, staff stated that SAX equipment was faulty, which often caused delays, and there was no proper and timeous communication regarding flight delays to customers.
• Employees need opportunities for upward mobility, staff undergo training but when completed they are overlooked for promotion.
• There is a staff shortage which disadvantages other staff members from attending training courses.
• Although staff had engaged with managers, some suggestions were taken on board while others were not.
• Staff at the ticket sales counter are not happy with the location of the coin machine as it was in full view of customers, this posed a security risk.
• The level of communication with the SAX customers was not sufficient as there is a perception among customers that SAA, SAX and Airlink are all one company.
• There have been instances of cyber fraud, in terms of the online booking system. 
• Staff stated that, they enjoyed working for the company but were not given an opportunity to grow.

 

3.2        Meeting with organised labour

 

The union represented included the Pilots Association, South African Transport Allied Workers Union (SATAWU) and Aviation Union of SA. The purpose of the meeting was to interact with the unions in order to understand the challenges facing workers. These were some of the issues raised by the different unions:

 

3.2.1     South Africa Transport and Allied Workers Union

The union highlighted the following issues:

• Expressed an appreciation regarding the quarterly meetings that the CEO has with staff and unions;
• Concern was regarding job security and the financial sustainability and stability of   the entity;
• Concern was raised regarding the fuel price hikes;
• Lack of clarity regarding the strategic direction of the company;
• A concern was raised regarding wages and annual back-pay being delayed, and how that had affected  the moral of the employees;
• A complaint that the company has a top heavy structure which has a bearing on the balance sheet of the company;
• Expressed concern over poor management of discipline leading to long hours spent on hearings;
•  There has been lack of results from the cost containment measures.

 

3.2.2    The Aviation Union of South Africa

The union highlighted the following issues:

• Shortage of aircraft spares and parts delaying maintenance (for four years);
• Lack of leadership at the technical division, as the company is not taking care of the workers;
• Concern regarding lack of leadership and consultation by the management of the technical division;
• Appointment of people without qualification and the relevant experience at management level;
• Unfair and biased application of the disciplinary processes and policies.

 

3.2.3 The Pilots Association

 

The union highlighted the following issues:

• There has been too much competition between SAX, SAA and Mango;
• SAA charged high levies on SAX;
• Headcount has been too high due to redundant posts;
• Suggested to do away with the newer turbo-prop fleet, and thereafter rationalise staff and pilots by 33 per cent;
• Wasteful expenditure especially in food served for customers on board;
• The union has largely been in agreement with management on austerity measures, but SAX has taken too slow to implement the changes.

 

 

 

 

3.3      Meeting with board and executives of SAX

 

The SAX Chairperson, Mr Andile Mabizela, introduced the presentation on SAX and the implementation of the 20/20 Strategy by highlighting the following:

 

• SAX gave a situational analysis which included the adverse R/$ exchange rate, increasing fuel prices, competition satiation, regulatory pressures (Airport Company of South Africa (ACSA) and Air Traffic and Navigation Services (ATNS) increased fees by 70 per cent), monopoly service providers, scarcity of aviation skills, and the geographical position of South African at the end of Africa.
• SAX then highlighted their financial, strategic, operational and commercial challenges as well as the action required to be undertaken to resolve these challenges.
• Some of the actions required a recapitalisation of the company, alternative sources of funding, better communication, re-fleeting, and the re-negotiation of supplier contracts.
• A programme of austerity measures was also highlighted, with a target of R290 million in savings at the end of March 2015.
• The company believes it has a viable business plan and has agreed with the Auditor-General to do interim audits on the company to identify issues early. The airline is working closely with the National Treasury to ensure measurability and achievable targets.
• The company will first introduce austerity measures, with a reduction in salaries to address cost base and board fees. SAX is sensitive to job losses and therefore will first implement austerity measures.
• Negotiations with suppliers usually succeed as SAX are transparent with the suppliers and it’s in the supplier’s interest to renegotiate contracts, for fear of having the contract cancelled altogether.
• The airline needed recapitalisation as it was not properly capitalised when it was established. A submission of 25 funding options was given to the shareholder, of which SAX has its preferences but were waiting on a decision from the shareholder.

 

4.         OBSERVATIONS

 

The Committee made the following observations:

4.1        Although the company is implementing austerity measures, the Committee still believed that much should be done to improve cash flows in the company;

4.2        The Committee acknowledged that there was progress made with regard to the implementation of the turnaround strategy, however raised concerns with the lack of clarity on the timeframes;

4.3        The Committee raised concern regarding the high airport charges that are imposed on the state-owned airlines and the adverse impact thereof;

4.6        The Committee appreciated the fact that there was a correlation between the information received from the employees, unions and the management, meaning that there was a dialogue taking place;

4.7        The Committee noted that there is a need for SAX to extend the renegotiation of contracts to include all the service providers doing business with the company;

4.8        The Committee noted that there is a need to improve the retention strategy for technicians and artisans;

   

5.         RECOMMENDATIONS

 

The Minister of Public Enterprises should ensure that South African Express Airways:

1.      reduces costs on training pilots overseas and should invest in a facility to train    

pilots in South Africa, thereby cutting costs on overseas flights and accommodation for students;

1.       reviews the top structure and the remuneration of executives in order to reduce costs;
2.       reduces costs of catering on shorter routes, or even reduce the amount of food in

      those flights;

1.       develop clearly measurable timeframes for the implementation of the turnaround   

      strategy in order to enable monitoring and evaluation;

1.       renegotiates all the contracts of service providers to ensure to improve financial  

      efficiencies and cash flow;

1.       attends to all the issues raised by the unions and staff that are highlighted in this   

            report and report to the Committee in three months after the adoption of the report in

            the House.

 

 

Report to be considered.