Upload
dennis-barker
View
216
Download
2
Embed Size (px)
Citation preview
1
28 March 2013
Commercial in Confidence
AGENDA
1.Overview of development process
2.Document Structure
3.Strategic Objectives
4.Main Thrusts & Expected Outcomes
5.Key Decisions & Implementation focus
Agenda
Introduction
Context
Our Strategy
Supporting Processes
LTTS Implementation
Questions & Comments
SAA LONG-TERM TURNAROUND STRATEGY (LTTS)BRIEFING FOR PORTFOLIO COMMITTEE ON PUBLIC ENTERPRISES 10 September 2013
2
Introduction
The most comprehensive & inclusive strategy development process in SAA’s history
• Extensive staff engagement: 400+ suggections received; • SAA’s first holistic long-term strategy, drawing on 7 of the World’s top 10
consulting groups & peer group comparisons;• SA Express & DPE involvement throughout;• Proven strategy development framework applied;• Board led;• Independently validated;• 20-year outlook horizon;• Immediate benefits & clear path to profitability; • Explicit emphasis on accountability & addressing weaknesses; and• Submitted to the Minister on 2 April 2013 and to Cabinet in August.
Necessitated by Commercial reality, informed by explicit Shareholder requirements• Inclusivity
• Benchmarked• Sustainability• Governance
• Actionable• Validated
• Stakeholder focussed
• ImmediateProcess Outcome
3
Context
Context informs South African Airways’ required & relevant Strategic response
• High cost base: expensive Assets & unproductive People
• Sub-optimal capital structure• Poor Stakeholder management• Strong African footprint,
operations & Brand
Internal strengths & weaknesses and Market realities culminate in Problems to be addressed and Opportunities
to be pursued
• Increased liberalisation of markets
• Airline market consolidation• Shifts in global air traffic• Commoditisation of short-haul air
travel
Value destructive Business Model
• Sub-optimal route network: International losses, Regional threat & Domestic pressure
• Failure to address geographic disposition
• Long-term weakness of Balance Sheet & high cost structure
• Cultural deficiencies & leadership volatility
• Governance of subsidiaries and processes lack maturity
• Poor implementation record• Poor decision support systems • Preceived Mandate conflict• No holistic aviation policy approach
• New collective Group Vision & Mission
• Creation of Integrated Airline Group
• Implementation of new Network, Alliance & Fleet Strategy
• Developing a “Whole of State” policy framework
• Immediate roll-out of human capital development interventions
• Implementation of new Financial Plan
• Implementation of business infrastructure & service interventions
• On-going focus on cost efficiency • Executive implementation
accountability
Assessment
Problem Statement Opportunity Statement
4
Our Strategy: Vision, Mission & Strategic Objectives
Mission, Vision & Strategic Objectives provides clarity of purpose to South African Airways
Brought to life, every day and in every way, by the values that we exhibit
Vision
Mission
Objectives
5
Our Strategy: Strategic Objectives
Our 5 new Strategic Objectives provide clarity for the Shareholder, Board & Management
SAA has to balance support for our National Development Agenda with commercial sustainabilitySupport for South Africa’s National
Development Agenda
•Growth will materially build on SAA’s current contribution
• Facilitating trade & tourism to major partners and African states (26 intra-African routes) through direct passenger and cargo services
• R 8.6 billion annually contributed to South Africa’s GDP and supporting 35 000 jobs in the general economy and a further 44 000 in tourism (2012 Oxford Economics Study)
•Aviation is a key enabler for the National Development Plan•Continued improvement in transformation profile
Commercial sustainability
•Net Operating Profit•Net positive cash flow from operating activities
DPE & NT, in consultation with SAA, are reviewing the financial model and requirements for the business
6
Our Strategy: Strategic Objectives
Our 5 new Strategic Objectives provide clarity for the Shareholder, Board & Management
Achieving the other 3 objectives are also critical to our long-term sustainability
Providing excellent customer service
•A new SAA passenger Customer Service Experience Framework has already been developed and is being implemented & Voyager is under-going major changes•SAA Cargo, SAA Technical & Air Chefs all have customer service improvement initiatives underway
Achieving consistent, efficient & effective operations
•SAA will build on its already outstanding safety and on-time performance records•A new Shareholder Engagement Model being developed and a new approach to reputational management and internal/external communications•Major inititiaves underway to improve labour productivity, recruitement and retention, succession planning and organisational design
Foster performance excellence
•Driving accountability, by linking performacne management to reward & recognition and consequence management•A new Enterprise Performance Management system will be developed, which will greatly improve Management Information Systems
7
Our Strategy: force integration and accountability through structure
Structure serves as an enabler to more effectively achieve our Strategic Objectives
Structure is also a mechanism for improved Governance• Provides structure for asset and capital deployment coordination• Provides mechanism for ring-fencing and/or equity flexibility• Single point of oversight with operational specialisation across the aviation
value chain
8
Our Strategy: we need to address our major competitive challenges
Sub-optimal route networkThe Network, Alliance & Fleet Strategy is at the core of any airline strategy
• Our long-haul international network is under-performing financially
• Our regional (African) network continues to perform well, however competition is steadily increasing
• The domestic market is challenging, however our dual-brand model of SAA/Mango leaves us well placed to respond to a commoditising market
• Mango continues ot perform well and can play a greater role for the Group in the years ahead
• SAA Cargo continues to perform well and can can also play a greater role for the Group
9
Our Strategy: align efforts while retaining unit-level focus
Subsidiary and Business Unit Strategies must be aligned to the Group objectives
Plans of Action enforce accountability for delivery
• SAA Technical focussed on:• Integration of SA Express Technical, synergy extraction with Denel and In-sourcing of high-value services
• African expansion and continuation of existing Turnaround Plan
• SAA Cargo focussed on:• Full implementation of transfer pricing and Process enhancements to improve efficiency
• Top-line revenue growth
• SA Travel Centre focussed on:• Growth in SAA revenue contribution and Expansion of African footprint
• Enhacement of franchisee value proposition
• Voyager focussed on:• Cost-effective enhacements to redemption options
• System rejuvenation
• Air Chefs focussed on:• Product enhancements, customer wins
• Process improvements and loss control
10
Supporting Processes: the bridge between strategy & action
Supporting processes are focussed on Efficiency and Effectiveness, reducing cost and ensuring service consistencyBalanced Scorecards serve as instrument to translate strategy to tangible actions
• Human Capital: Performance management, succession and accountability emphasis• Sales and Distribution: Increasing reach through cross-Group leverage and specfic segment focus• Operations: Continued focus on safety and operational integrity, along with automation and cost
compression• Information Technology: Modernisation of business support infrastructure, MIS & direct service/sales
channels• Environment: Focus on meeting compliance requirements• Marketing: Brand standardisation and rebuilding• Communication: pro-active, commercialy orientated messaging to highlight the value SAA adds to South
Africa;• Customer service: Alignment of processes, systems and people to deliver consistent service externally
benchmarked• Procurement: Compliance emphasis and focus on service level management and enterprise development• Governance and Risk: Focus on full PFMA compliance through improvements in planning activities• Stakeholder relations: Development of an integrated Stakeholder relations function within SAA
11
Supporting Processes: the Financial Plan
All Strategies, Plans and Processes culminate in a Financial outcomeThe projected Finance Plan outcomes indicates a financially sustainable business
• Contain current Shareholder value depletion
• Redress deficiencies in the Group’s capital composition
• Equip the Integrated Airline Group with an appropriate fleet
• Realise organic growth in retained earnings
• Optimise the group’s Balance Sheet
• Containment – maintaining liquidity and solvency
• Alignment – address group capital structure
• Refinement – strategies and plans aimed at sustained growth
• Growth – full benefits of new wide body fleet and resumption of international network
• Optimisation and growth – funding further expansion and growth (internally generated capital and reserves)
Objectives Approach
12
1. Organisational clarity on the way forward and everyone’s role.
2. CEO ownership & long-term tenure.
3. Executive (Change Leader) stability.
4. All actions are informed by the strategy.
5. Good market intelligence reaches the leadership and informs decision support.
6. Once decisions are made they are rarely second-guessed.
7. Very effective rapid implementation.
8. High visibility of implementation progress for all stakeholders.
9. Alignment of performance and reward.
10. On-going strategy revalidation informed by the competitive landscape.
LTTS implementation will transition SAA to a sustainable business model These are the attributes of successful major change programmes
LTTS Implementation: attributes of successful major change programmes
13
Board (incl. LTTS Committee)
1. DPE & National Treasury and via Quarterly Reports
2. As required to Portfolio Committee & other key stakeholders
CEO
Group EXCO Turnaround Office
LTTS implementation will transition SAA to a sustainable business model Future SAA Corporate Plans will include an LTTS Implementation Plan, including all
KPIs agreed with the Shareholder
LTTS Implementation: alignment to PFMA cycle via annual Corporate Plan
2013-16 Corporate PlanLTTS Amendment
14
LTTS Implementation: quick wins already achieved
There have already been some quick LTTS implementation winsAlready supporting the more effective achievement of our 5 Strategic Objectives
•SAA & SAA Cargo African growth: SAA capacity increases on existing routes (from 6-7 weekly flights to Accra [already operating], new schedules in place for Mauritius (8-9 weekly, September); Dar es Salaam (11-12 weekly, October); Lusaka (18-19 weekly, October); and Kinshasa (4-6 weekly, November). Evaluations also being completed on increased capacity to Harare, Ndola and Windhoek
•Mango operating to Zanzibar (weekly from September) and received two more aircraft and increasing domestic scale (operational from 8 September)
•Combined SAA/Mango response to Fastjet market entry
•Etihad and TAM code-share agreements (building “non-metal” capacity
•Nigerian National Carrier project added to West Africa Hub options (Shareholder engagement required)
•New SAA Customer Experience Framework approved by Group EXCO and being implemented
•Higher utilisation of the fixed capital cost base (aircraft), from September, will further reduce unit cost
•Further (≈ R 100 million) Cost Compression Programme savings (currently being audited)
TANZANIA
MAURITIUS
GHANA
ZAMBIA
DRC
15
Long-Term Turnaround Strategy
Questions & Comments