SAA reviews service contracts

Johannesburg – South African Airways’ (SAA) has successfully re-assessed and re-negotiated a number of key service contracts as part of its fundamental restructuring programme, which has resulted in significant cost savings.

This initiative was implemented as part of SAA’s restructuring to lower the airline’s current high operational cost base and ensure it delivers the best possible service within the market.

“In just over three months since the approval of our business plan, we are beginning to realise some of its objectives which will place us on the road towards financial sustainability,” says Chris Smyth, SAA General Manager Operations.

Significant savings after the renegotiation of certain contracts have been projected. The contracts include:

• * Ground handling contracts with Dakar operation service provider, Senegal Handling Service, and baggage services provider at O.R Tambo, Optima.
• * The contract between SAA and its telephony service provider, Transtel will result in a substantial saving over the next two years
• * Turnaround ground handling rates have been reduced for SAA’s operations in Hong Kong
• * An agreement has been reached between SAA and the Hong Kong Airports Authority to move from Terminal 1 to 2 for departures
• * Renegotiation of the contract with warehouse and logistics service provider, Kintetsu World Express, which is responsible for the distribution of on board items

The process of reviewing contracts is ongoing and SAA is working hard at finding new and innovative ways of reducing costs, while also growing revenue, over the next 18 months.

Progress has also been made with other restructuring initiatives aimed at restoring SAA to profitability in order to ensure that we continue to deliver value to our consumers as a full service airline. General Managers in each unit were tasked with implementing restructuring initiatives in May after the SAA Board approved the business plan, and this is now in full swing.

The process of grounding the costly 747-400s is well under way, with two of six aircraft having left the fleet. The rest will be grounded in the following months.

The review of the route network has led to the planned opening of a new route to Libreville, which will begin on 19 September. Our route to Munich, which was launched in July, is doing very well with load factors exceeding 75%.

Our commitment to reducing the management headcount spend by 30% is on track. The rationalisation of the first and second level management has been completed and we are now in consultation with the third and final level. This should be completed within the next four to six weeks.

Source: www.flysaa.com

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