SAA Begins Cost-Cutting Measures, Streamlines Management

South African Airways has begun a series of cost-cutting measures, including the streamlining of the airline’s managers by between 20 to 30 percent.
Addressing a management meeting attended by more than 500 managers, President and CEO, Andre Viljoen, said the airline was “cleaning up its management structure” and introducing cost cutting measures. The airline industry has generally been experiencing major challenges. These were exacerbated by the September 11 attack on American business and political symbols.

“After September 11 airline values across the world have been decimated by up to 60 %. There is a possibility of many of them going insolvent. There have been worldwide layoffs totalling up to 200 000,” said Viljoen.

“There are significant weaknesses within SAA such as the burgeoning management structure, inconsistent passenger service, lack of passion and ownership by some SAA employees and increasing costs,” added Viljoen.

“Between May 1999 and October 2001, SAA management structure jumped from 480 to 668
- a 39% increase. For us to survive, we have to streamline the management structure, eliminate duplication and non-value adding functions, including the reinforcement of accountability and responsibility.

“To achieve that, we have to reduce our management numbers by between 20 to 30 percent. In all of these the Labour Relations Act will be followed to the letter,” said Viljoen.


Other cost-cutting measures include:

áReplacing all company cars with an allowance scheme;
áCompany cell phones to only to be used if the job requires it;
áSecretaries to be shared among managers;
áDuty travel to be undertaken only when necessary;
áForeign travel allowances to be reduced from $90 to $70 per day;
áAll new employment has been frozen; and
áRestrictions on all offsite retreats for team-building
áPerformance bonuses to be paid only if SAA meets headline profit of R50m

However, Viljoen said it was not all doom and gloom adding that this was not a retrenchment programme, but a “management clean-up”.

“SAA is not about to go bust. We have a very strong balance sheet, R2-billion in cash, but this can be eroded fast. The European routes still carry many passengers, but the numbers are declining. We should attract premier passengers back.
“Domestic travel is also starting to decline and we must get premium clients, such as corporate clients back and improve Voyager, our frequent flyer programme. We must also look at Africa for further growth, as other airlines are scrambling for this potential “honeypot”, said Viljoen.

The total strategy is being driven by the Perfecting the Basics mantra—to be used by employees to get the company back on the path to growth.

“We want to be the carrier of choice and not because passengers have no other option but because we are creative, dynamic, proactive and performance driven,” Viljoen said.

“Perfecting the Basics” also include shortening aircraft turnaround from 60 to 30 minutes, revamping customer service, renewing the long-haul fleet, managing currency and fuel exposure, including the revamp of our long-haul fleet.

SAA management is setting an example by cleaning up its act. “We all need to change our attitude towards SAA by being passionate, excited and happy to come to work. We must attract and retain customers. Every customer we upset may result in job losses. We must become customer focused, both internally and externally and not tolerate non-performance. We must deliver, deliver, deliver,” he told his management staff.