SAA Results Presentation and Future Strategy 31 October

SAA Results Presentation and Future Strategy 31 October 2001

Agenda i SAA results for last 5 years i YE March 2001 - an extremely challenging year i Details of financial performance i SAA future strategy “Perfecting the Basics” i USA impact i Summary SAA Results and Strategy 210901 ANV 2

Results for the last 5 Years Contents of Results i. Operating Statistics i. Reported Net Profits/(Losses) - Including Asset Sales and significant items i. Headline Earnings/(Losses) - Excluding Asset Sales and other adjustments i. Adjusted Net Profits/(Losses) - Headline Results deduct/add once-off items i. Balance Sheets SAA Results and Strategy 210901 ANV 3

Results for the last 5 Years South African Airways has been a growing business Pax (Mil) LF (%) Cargo Ton Km (Mil) ASK’s (Mil) Fleet i 1997 4, 9 64% 337 21, 528 49 i 1998 5, 1 64% 433 23, 659 50 i 1999 5, 3 65% 392 25, 173 54 i 2000 5, 8 62% 578 29, 034 51 i 2001 6, 1 67% 640 29, 656 62 SAA Results and Strategy 210901 ANV 4

Results for the last 5 Years Turnover improved significantly, however spiralling operating costs offset revenue improvements Turnover RM’s Operating Costs RM’s i 1997 6, 070 i 1998 6, 891 14% 6, 987 7% i 1999 8, 142 18% 8, 627 23% i 2000 9, 263 14% 9, 356 8% i 2001 10, 839 17% 11, 806 26% SAA Results and Strategy 210901 ANV 6, 506 5

Results for the last 5 Years Reported Profits show a strong upward trend Year Ended: Reported Net Profits/(Losses) RM’s i 31 March 1997 (396) i 31 March 1998 (302) i 31 March 1999 10 i 31 March 2000 349 i 31 March 2001 408* * Subject to any adjustments that may be required by the actuarial valuation and audit of the Transnet Pension Fund SAA Results and Strategy 210901 ANV 6

Results for the last 5 Years Reporting methodology i SAA has researched the airline industry to establish if a universal practice exists in publishing reported results: - Some airlines include profits/(losses) from aircraft sales in operating results (e. g. Swissair, Air France, Finnair, Lufthansa, etc) because regular turnover of the fleet is part of the business - Other airlines exclude profits/(losses) from aircraft sales to arrive at operating results, but include them only in the bottom line (e. g. airlines reporting under US GAAP - such as KLM, BA) i SAA has in the past (1997 -2001) included profits/(losses) from sale of aircraft in its operating results i SAA has decided to present its results in-line with the GAAP headline earnings in order to provide full disclosure SAA Results and Strategy 210901 ANV 7

Results for the last 5 Years Headline Earnings/(Losses) i. To arrive at Headline Earnings/(Losses) (in terms of GAAP) adjust for the following: - Profit on Sale of aircraft and other assets - Profit on Sale of business operations - Other adjustments SAA Results and Strategy 210901 ANV 8

Results for the last 5 Years Headline Earnings/(Losses) Reported Net Profits/(Losses) RM’s Headline Earnings/ (Losses) RM’s i 31 March 1997 (396) (477) i 31 March 1998 (302) (289) i 31 March 1999 10 (269) i 31 March 2000 349 (32) i 31 March 2001 408 (735) Year Ended SAA Results and Strategy 210901 ANV 9

Results for the last 5 Years Adjusted net profits account for one-off items i. Significant “One Time” and “Exceptional” items are deducted/added back to Headline Earnings/(Losses) to arrive at Adjusted Net Profits/(Losses) - Revenue items (deducted) - Cost items (added back) SAA Results and Strategy 210901 ANV 10

Results for the last 5 Years Adjusted Net Profits Reported Net Profits/(Losses) RM’s Headline Earnings/(Losses) RM’s Adjusted Net Profits/(Losses) RM’s i 31 March 1997 (396) (477) (411) i 31 March 1998 (302) (289) (253) i 31 March 1999 10 (269) (273) i 31 March 2000 349 (32) (83) i 31 March 2001 408 (735) (627) Year Ended SAA Results and Strategy 210901 ANV 11

Results for the last 5 Years What do the Headline Earnings/(Losses) and Adjusted Net Profits/(Losses) show? The “core business” of SAA improved from the year ended 31 March 1997 to the year ended 31 March 2000. . . However. . . It declined significantly in the year ended 31 March 2001 SAA Results and Strategy 210901 ANV 12

Agenda i SAA results for last 5 years i YE March 2001 - an extremely challenging year i Details of financial performance i SAA future strategy “Perfecting the Basics” i USA impact i Summary SAA Results and Strategy 210901 ANV 13

The challenges of YE March 2001 was particularly challenging for SAA i Fuel price i Rand devaluation i Implementation problems with B 737 -800 i Long-haul product not competitive i Excess capacity on European routes i Difficulty with implementation of Africa strategy SAA Results and Strategy 210901 ANV 14

The challenges of YE March 2001 Hedge gains offset, but did not eliminate fuel cost increase Budget 2, 009 R(m) SAA Results and Strategy 210901 ANV 15

The challenges of YE March 2001 US Dollar strength increased costs more than revenues Rand devaluation: i. Year Ended 31 March: 1997 – Actual Average Rand/US$ – Year-on-year Change R 4. 49 – Actual Average Rand/GBP£ – Year-on-year Change R 7. 55 1998 1999 2000 2001 R 4. 72 R 5. 87 R 6. 16 R 7. 39 5% 24% 5% 20% R 9. 18 22% R 9. 89 R 10. 50 R 11. 46 8% 6% 9% i. SAA’a revenue is earned in a basket of currencies which historically offset US$ operating cost increases as a result of the devaluation of the Rand i. The strengthening of the US$ against major European currencies caused SAA’s historical natural hedge to diminish i. Steps are being taken to redress this imbalance SAA Results and Strategy 210901 ANV 16

The challenges of YE March 2001 B 737 -800’s have not yet delivered gains expected. . . i. Implementation problems - revenue/cost impact - Business class seats Pilot training Airport handling Cargo/Baggage Handling Delayed installation of winglets temporarily increased fuel use Ownership cost greater due to Rand devaluation, but offset by interest earned on surplus cash Negative Impact (R 152 M) SAA Results and Strategy 210901 ANV 17

The challenges of YE March 2001 . . . But progress has already been made in tough operating environment i Route network extended to over 600 destinations through alliances with world class airlines i Yield management system improved i Sales organisation enhanced i Strong cost controls introduced i Fuel Hedge program continued i Strong Balance Sheet - Free cash SAA Results and Strategy 210901 ANV 2001 R 2, 0 B 2000 R 1, 5 B 18

Extensive Network Built on Strong Bi-lateral Alliances, the SAA Network Serves Over 600 Destinations Frankfurt New York London Zurich Atlanta Dubai Hong Kong São Paulo Johannesburg/Cape town Perth SAA Results and Strategy 210901 ANV Sydney 19

Agenda i SAA results for last 5 years i YE March 2001 - an extremely challenging year i Details of financial performance i SAA future strategy “Perfecting the Basics” i USA impact i Summary SAA Results and Strategy 210901 ANV 20

Details of financial performance Deriving Headline Earnings from Reported Profits SAA (Pty) Ltd 31/03/01 Reported Net Profits/(Losses) i. Headline Earnings Adjustments - Profit from sale of assets 8 Sale of land to ACSA 8 Sale of four A 300 aircraft 8 Sale of one B 747 Freighter 8 Sale of two A 320 aircraft 8 Sale and leaseback of ( x ) B 737 -200’s 8 Sale and leaseback of two B 747 -400’s 8 Sale and Leaseback of one B 747 -300 8 Sale of Ground Support Equipment business unit 8 Sale of other assets 8 Sale of Duty Free operation - Payments for Branding & Codeshare - SA Airlink - Phase out costs on A 300 and A 320 fleets - Write down of Equant NV shares - Write up of Equant NV shares - Impairment of assets Headline Earnings/(Losses) SAA Results and Strategy 210901 ANV 408 (1, 562) SAA a division of Transnet Ltd 31/03/00 RM 31/03/99 31/03/98 349 10 RM (302) (202) (130) 13 31/03/97 (396) (81) (28) (93) (148) (194) (391) (760) (81) (129) 5 (26) (30) (100) (179) (148) (32) (269) 13 (35) 299 130 25 (735) (289) (477) 21

Details of financial performance Fleet strategy i To release aircraft equity, where the future value of such aircraft is under threat i To retain the proceeds for investment in future fleet requirements i This strategy has been followed in respect on the following fleets: q q Boeing 737 -200 (13 aircraft) Boeing 747 -400 (2 aircraft) Airbus A 300’s (4 aircraft) Airbus A 320’s (2 aircraft) SAA Results and Strategy 210901 ANV 22

Details of financial performance Aircraft assets were sold for good commercial reasons Boeing 737 -200 price development US$ MM- 2 nd Half 2000 i 737 values dropping due to future noise abatement regulations Boeing 747 -400 price development US$ MM - 2 nd Half 2000 i 747 values dropping as major airlines reduce average aircraft size i Aircraft sales versus guaranteed exit in future from ageing aircraft fleet i A 300’s and A 320’s sold as part of 737 -800 fleet renewal program SAA Results and Strategy 210901 ANV 23

Details of financial performance Deriving adjusted profits from headline earnings SAA (Pty) Ltd 31/03/01 SAA a division of Transnet Ltd 31/03/00 31/03/99 RM 31/03/98 31/03/97 RM Headline (loss) Earnings (735) (32) (269) (289) (477) i. Revenue items - Forward Sales releases (Historic) - Voyager Revenue - Accolades Program - FEC rollover profits related to B 777 order - Atraxis outsourcing inducement - Airchefs dividends received - Apron Services Management Fees - Restructure of leases in respect of two B 747 -400’s - B 767 Reimbursement for under performance (441) (300) (197) (100) (139) (7) (2) (7) 135 92 43 73 43 43 73 (253) (411) i. Cost items - Retrenchment costs - Settlement costs (expatriates) - Engine overhaul outsourcing - Spares write-off - obsolete spares write-off - Spares write-off - A 320 and A 300 spares write-off - Veer. com write-off - Pension Fund conversion costs - Other provisions - Interest on Pension Fund Debentures Adjusted Profits/(Losses) after significant items and Headline Earnings/(Losses) adjustments SAA Results and Strategy 210901 ANV (62) (117) (35) (20) (102) (39) 549 14 109 136 51 79 106 55 146 76 45. 3 25 (627) (83) (273) 24

Details of financial performance Balance sheets for last 5 years SAA Results and Strategy 210901 ANV 25

Details of financial performance Cash flow SAA Results and Strategy 210901 ANV 26

Agenda i SAA results for last 5 years i YE March 2001 - an extremely challenging year i Details of financial performance i SAA future strategy “Perfecting the Basics” i USA impact i Summary SAA Results and Strategy 210901 ANV 27

Future Strategy Key challenge for the future Return SAA to profitability How ? SAA Results and Strategy 210901 ANV 28

Future Strategy of “Perfecting the Basics” SAA Results and Strategy 210901 ANV 29

Future Strategy Key Deliverables i Revamp customer service i Sustained revenue growth i Optimise alliances i Implement Africa strategy i Cost reductions i Improve operating efficiencies i Renew long haul fleet i Manage currency and fuel exposure i Staff development SAA Results and Strategy 210901 ANV 30

Key Deliverables Revamp customer service i Know our customers - Customer focus groups i Give customers what they want - Revamp gate to gate service and product to deliver seamless and differentiated customer service - Implement business class seating in short haul fleet - Implement product upgrades on key long haul routes - Plan future long haul fleet SAA Results and Strategy 210901 ANV Regain Premium Market share 31

Key Deliverables Revamp customer service continued. . . i Optimise frequencies, schedules and aircraft type; eliminate multi-stop services i Offer maximum connectivity from existing alliances i Attract new alliance partners to extend global access SAA Results and Strategy 210901 ANV 32

Key Deliverables Sustained revenue growth Passenger 2002 YTD growth - 26, 7% Domestic Regional International SAA Results and Strategy 210901 ANV % Revenue Growth 15 54 27 33

Key Deliverables Sustained revenue growth Passenger 2002 Yields Domestic Regional International SAA Results and Strategy 210901 ANV 2002 R 2001 R 729 1, 616 3, 335 633 1, 280 3, 083 34

Key Deliverables Sustained revenue growth Passenger 2002 Load Factors Domestic Regional International SAA Results and Strategy 210901 ANV 2002 % 2001 % 67, 4 64, 5 69, 2 65, 5 66, 6 64, 7 35

Key Deliverables Sustained revenue growth Cargo 2002 YTD growth - 14, 6% Domestic Regional International SAA Results and Strategy 210901 ANV % Revenue Growth (2, 2) 34, 1 16, 4 36

Key Deliverables Sustained revenue growth Technical i. Planned growth of R 250 M - Swiss. Air MD 11 D-checks (12) - Lufthansa B 747 D-checks (2) - 1, 000 manhours committed by Boeing as part of the B 737 -800 acquisition SAA Results and Strategy 210901 ANV 37

Key Deliverables Optimise Alliances i. Maximise benefits - Growth in yields achieved Better connectivity Increase in destinations served (600) Relationships with all major global alliances 8 Star Alliance 8 one world 8 Sky Team 8 Qualiflyer - Audit underway SAA Results and Strategy 210901 ANV 38

Key Deliverables Implement Africa Strategy i Develop hub strategy for East and West Africa i Resume operations to US$ markets 0 Kinshasa 0 Livingstone 0 Ndola i Increased capacity and frequency (54% revenue growth) SAA Results and Strategy 210901 ANV 39

Build SAA’s position as the leading airline in Africa Great Opportunity African Open Skies Sal Lagos Abidjan Accra Entebbe Nairobi Kigali Dar Es Salaam Ndola Lilongwe Luanda Vic Falls Blantyre Harare Bulawayo Lusaka Windhoek Gaborone Walvis Bay JNB Comores Mauritius Maputo Manzini SAA Results and Strategy 210901 ANV Cape Town Durban Maseru 40

Key Deliverables Cost reductions i Cut general costs by R 250 M i Reduce catering costs through product simplification (R 40 M) 0 Bistro bag i Rand procurement i. s. o. US$ procurement 0 Toilet bags i New fleet will reduce maintenance costs i Distribution costs 0 Commissions reduced by 2% (R 70 M from 2003) 0 Overrides limited to 60% of prior year (R 30 M from 2003) i Renegotiate labour agreements for FDC i Restrict use of expatriates and consultants (R 250 M) Minimum savings expected R 600 M SAA Results and Strategy 210901 ANV 41

Key Deliverables Improve operating efficiencies Shorthaul i Optimise B 737 -800 implementation 0 0 Split B 737 -800 and B 737 -200 fleet Install new business class seats Retrofit winglets to achieve fuel savings Lease out off peak surplus capacity (Transavia - R 20 M) i Reduce turn times on domestic schedule from 60 to 30 minutes 0 Free up 4 aircraft (R 100 M saving in ownership cost) SAA Results and Strategy 210901 ANV 42

Key Deliverables Improve operating efficiencies Longhaul i Millenium product 0 Complete implementation on B 747 -400 fleet 0 Regain competitiveness i New fleet 0 0 0 0 RFP scheduled for 26 September 2001 Reduce DOC’s (to significantly offset ownership costs) Enhance reliability Increase utilisation Crewing efficiency Improve cargo capacity Additional lift for domestic and regional SAA Results and Strategy 210901 ANV 43

Key Deliverables Manage currency and fuel exposure US$ Commitments: i Total commitment - US$1, 3 B i Covered - US$1, 0 B i MTM ±R 500 M Jet Fuel: i Covered 70% i Objective 100% i Expected cash flows US$3 M per month i Implementing hedging strategy for domestic uplifts i Expected savings (R 15 M) SAA Results and Strategy 210901 ANV 44

Key Deliverables Staff development i Restrict use of consultants (R 130 M) i Fast track talented individuals 0 Swiss. Air training i Utilise industry training programs i Proper succession planning to reduce reliance on expatriates i Reward for performance 0 Incentive programs being developed SAA Results and Strategy 210901 ANV 45

YTD Results 2002 SAA Results and Strategy 210901 ANV 46

Agenda i SAA results for last 5 years i YE March 2001 - an extremely challenging year i Details of financial performance i SAA future strategy “Perfecting the Basics” i USA impact i Summary SAA Results and Strategy 210901 ANV 47

USA Impact i R 1, 8 B turnover generated out of the USA i Too early to quantify impact i Team currently analysing situation i Freeze placed on employment i Insurance impact (R 70 M) SAA Results and Strategy 210901 ANV 48

Agenda i SAA results for last 5 years i YE March 2001 - an extremely challenging year i Details of financial performance i SAA future strategy “Perfecting the Basics” i USA impact i Summary SAA Results and Strategy 210901 ANV 49

Summary Strategy of “Perfecting the Basics” will return SAA to profitability SAA Results and Strategy 210901 ANV 50

Corporate Governance i Significant focus i PFMA 1 April 2000 0 Significant complexity i New Chairman - D. M. J. Ncube i Directors and Management committed to highest level of corporate governance and compliance with the PFMA SAA Results and Strategy 210901 ANV 51

Thank You

Head Count Male Female i. Black Bullet. Text i. White Bullet. Text i. Asian/Coloured Bullet. Text SAA Results and Strategy 210901 ANV 53

Future Strategy “Perfecting the Basics” comprise of three steps: - Step 1 - New Leadership Team - Step 2 - Developing Our People - Step 3 - Strategic Changes and Implementation SAA Results and Strategy 210901 ANV 54

Future Strategy Step 1 - A new leadership team i Focused on developing “customer service” i Introducing additional airline experienced leaders in key portfolios i Empowering management and staff - reducing the number of direct reports to CEO from 17 officers to 11 EVP’s i Substantial focus on Corporate Governance SAA Results and Strategy 210901 ANV 55

Future Strategy Corporate Governance - PFMA i The PFMA as introduced 1 April 2000 with the intention of ensuring that State owned enterprises are managed efficiently and effectively i This act has introduced significant complexity in management of the airline i Both the Directors and Management are committed to the highest levels of corporate governance and compliance with the PFMA i Steps have already been implemented to improve corporate governance SAA Results and Strategy 210901 ANV 56

Future Strategy Step 2 - Developing our people i Developing Passionate People …. . . Training & Rewarding Performance i Working the Right Way …. . . Changing Culture; living SAA’s Values and being Accountable i Doing the Right Things …. . . Aligning with “Perfecting the Basics” SAA Results and Strategy 210901 ANV 57

Summary and Outlook 2002 With our “Perfecting the Basics” strategy, we are committed to putting SAA on the path to profitability i Commitment to highest standard of corporate governance q New highly regarded Chairman (D Ncube) q Revised Delegation of Authority for Management q Board to be strengthened with addition of experienced nonexecutive directors i Developing our people, building passionate customer service q Complete revamp of Service from Gate to Gate in process q Entire service delivery redefined and retraining being undertaken q Jobs being regraded and incentive scheme under development SAA Results and Strategy 210901 ANV 58

Summary and Outlook 2002 With our “Perfecting the Basics” strategy, we are committed to putting SAA on the path to profitability i Costs reduction program implemented: q 75 -60% of Fuel usage hedged at $31, 7/barrel and constantly monitored q the reduction in the natural hedge of the Rand/US$ devaluation being addressed through specific hedging instruments purchased q Use of external Consultants limited annual savings R 130 M q Expatriates reduced to 2 annual savings R 120 M q Cost reduction in all operating units expected to generate R 500 M q Other one-off costs not to be repeated (Engine outsource, Veer. com, Pension conversion) SAA Results and Strategy 210901 ANV 59

Summary and Outlook 2002 With our “Perfecting the Basics” strategy, we are committed to putting SAA on the path to profitability i Strong Balance Sheet with substantial free cash to enable fleet renewal q R 2, 04 B i Strong position to take advantage of liberalised skies in Africa SAA Results and Strategy 210901 ANV 60

Understanding the financial performance Details of the adjustments i B 737 -800 Renewal Program: RM’s 8 Sale of four A 300 aircraft 93 8 Sale of two A 320 aircraft 194 i Sale and Leaseback of B 737 -200’s 391 i Sale and Leaseback of two B 747 -400’s 760 i Sale of Ground Support Equipment Business 129 - Sale of non core “toilet and cleaning” services to Apron Services SAA Results and Strategy 210901 ANV 61

Understanding the financial performance Details of the adjustments (cont. ) RM’s i One Time Payment for Branding and Codeshare 25 year contract with SA Airlink 35 i Phase out costs of A 300 and A 320 fleets preparation costs in respect of sale of A 300’s and A 320’s fleets (299) Cost added back i Write down of Equant NV Shares - Revaluation of Equant Shares (Write down from $85. 0 to $34. 0 per share. Previous year (2000) was a write up of R 178. 708 M) (130) Cost added back SAA Results and Strategy 210901 ANV 62

Understanding the financial performance Details of adjustments to arrive at adjusted profits RM’s i Forward Sales Releases (Historic) - Systems now set up to determine historic prescribed unclaimed tickets and cargo manifest receipts - which have been written off to revenue 300 i Restructure of leases in respect of two B 747 -400 to improve overall costs 102 i B 767 reimbursement for poor technical performance of “Second Hand” B 767’s leased 39 SAA Results and Strategy 210901 ANV 63

Understanding the financial performance Details of adjustments to arrive at adjusted profits (cont. ) RM’s i Settlement Costs - Early termination costs of Expatriates 109 i Engine Overhaul Outsourcing - One-off cost of moving to “power by hour” contracts 136 i Spares write-off - Obsolete spares write-off - A 300’s and A 320’s spares write-off i Veer. com write-off - Write-off of Veer. com e-Commerce portal SAA Results and Strategy 210901 ANV 51 79 106 64

Details of financial performance Fleet plan will further simplify the operations of SAA Results and Strategy 210901 ANV * Assumes no-growth 65

Future Strategy Key strengths for the future i Improved domestic market share i Strong international network and connectivity i Marketing capabilities to international standards - sales - yield management - e-commerce i World class technical operations and third party sales capabilities SAA Results and Strategy 210901 ANV 66

Details of financial performance Items not adjusted for in years 2000 and 2001 i Consultants Costs 2001 2000 - Bain & Co. R 82, 2 M R 76, 6 M - Mc. Kinsey and Co. R 54, 4 M R 9, 6 M (including Veer. com charges) i Expatriate Costs R 174 M R 156 M SAA Results and Strategy 210901 ANV 67