Presentation to Portfolio Committee on Public Enterprises 16 March 2010 Private and Confidential Private and Confidential

Agenda Alleged collusion on flight ticket prices Baggage pilferage incidences (statistics) and counter measures The breakdown of all charges and taxes in total ticket prices

Alleged Collusion on Ticket Prices SAA has held discussions with various players in the airline industry on requirements for the 2010 FIFA World Cup (“FWC”) at various meetings convened by the Dept of Transport, the Dept of Tourism and other interested parties. The subjects in such discussions were limited to matters of logistics and capacity requirements during the FWC. Other than mentioned below, SAA has at no time held discussions with competitors in regard to FWC pricing. On 25 November 2009 SAA received an email from a competitor carrier that was copied to the SA domestic industry. The email contained certain suggestions that could give rise to inferences of conduct that is in contravention of competition law.

Alleged Collusion on Ticket Prices Following an assessment of the risks associated with the competitor’s conduct, on 1 December 2009, SAA informed the Competition Commission about the communication received from the competitor and at the same time applied for leniency in the event that the Commission makes the decision to refer the conduct to the Tribunal for the prosecution of a contravention of the Competition Act. SAA later received a summons from the Competition Commission requiring documents and correspondence relating to the World Cup SAA has cooperated with the Competition Commission fully at all times and has responded to the Commission’s requests. A separate information note has been provided on other competition law matters as requested by the Committee.

Alleged Collusion on Ticket Prices Following an assessment of the risks associated with the competitor’s conduct, on 1 December 2009, SAA informed the Competition Commission about the communication received from the competitor and at the same time applied for leniency in the event that the Commission makes the decision to refer the conduct to the Tribunal for the prosecution of a contravention of the Competition Act. SAA later received a summons from the Competition Commission requiring documents and correspondence relating to the World Cup SAA has cooperated with the Competition Commission fully at all times and has responded to the Commission’s requests. A separate information note has been provided on other competition law matters as requested by the Committee.

ORTIA bags pilfered per 1000 passengers

Actions Taken What was inititated/intensified over last few weeks: Daily meetings with airport stakeholders SAA, Swissport, SAPS, ACSA, RAPS, to coordinate the daily action plan of the security units. Frequent stop/searchs implemented (70-90 vehicles, bag rooms, on board) Setup of an intelligence network to gather information from all parties Swissport placing more supervision on the ramp Gathering of statistical data, identified “Hot“ flights are checked New staff are vetted by means of VSA testing. Swissport introduced new loading sequence to combat bag tampering New restrictions – e.g. no loading staff allowed in loading bays while loading not underway

Actions Planned What are we going to do in addition?: Increase 3rd party undercover agent presence on the ramp Further increase management visibility on the ramp Increase the strength of intelligence by means of the Griffith Reid information systems Camera systems to be considered for transport vehicles.

Successes What have we achieved?: Several staff from different service providers have been apprehended An investigation into a syndicate that specializes in theft in a specific area using a specific modus should soon producing results. Two houses have been identified and searched by SAPS. They contained potentially stolen goods. Arrests were made. Two more dealers in stolen properties have been identified and are currently under surveillance. Subsequent arrests airport staff are expected. - Pilferage in February down by 20% on January

Gaps that still exist Where are our shortcomings?: Still too many security gaps that alllow stolen items out of the airport. Available technology (e.g. cameras) not yet utilized effectively Initial source of potential criminals not identified yet, so criminals still getting past screening process Quality and ethics of staff on ramp is below mininums. Crime being committed by all sectors, including security staff

Conclusion But, pilferage has crept back in 2009. Baggage pilferage was substantially reduced after a concerted effort in 2008 But, pilferage has crept back in 2009. Pilferage is not petty theft by airport employees, but is due to sophisticated syndicated crime rings that SAA does not have the resources to eradicate. This requires a concerted co-ordinated effort together with SAPS crime intelligence, national intellegence, ACSA, all airlines and the handling companies. Success will not be achieved by simply tightening security. Our actions must be constantly evolving in order to keep one step ahead of criminals who are able to continually adapt to our measures. Only when syndicates find that they can no longer constantly sustain the costs of their operations with their ill gotten gains, will they turn away from our airports and target some other area.

Air Fare Breakdown (e.g. JNB-CPT one way) To Who? What for? Per Passenger ACSA Airport usage fees 42,98 SITA Check in counter fees 6,14 ACS Baggage screening 12,28 Total Airport Charges   61,40 SA-CAA Safety Charge 11,00 SARS VAT on Airports Charges 8,60 VAT on Tickets 235,24 Total VAT 244,69 SAA K Class Airfare 1 450,00 Fuel levy ($30,70) 230,25 Total SAA 1 680,25 Total Ticket price R1 996,48

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