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1. Harvard Case Study Review
South African Airways
By: Elizabeth Kulin

2. 1. Stockholders
• Internal
• Management – poor financial stability can lead to layoffs, business expense
cut backs and lack of available promotion opportunities.
• Employees – lack of financial stability and cost reductions lead to
employment layoffs, under compensation, decrease in benefit coverage, and
long work hours.
• Stockholders – poor image and financial instability can lead to decline in
profitability and value in stock price.
• Suppliers – lack of profit growth disabled SAA from purchasing new planes
from suppliers.
• Board of directors – were brought under scrutiny for high CEO turnover rates,
hedging mistakes and corruptions/scandals by executive staff.
• Government –Affiliation with SAA can affect the government’s reputation
and financial stake (owns 80% of airline).
• External
• Customers – low moral of staff and lack of funds to improve performance
affect the operations of the airline and its ability to offer quality service to the
customers. Also the association with the government affected customer
purchasing decisions during apartheid.
• Partners –during apartheid many airports would not allow SAA to partner.
SA image becomes associated to partners brand image.
• Union – financial insecurity affects SAA’s ability to grant union requests
(higher wages, better benefits, etc).
• Competition - The raise and fall of SAA affects competition opportunities and
threats. For example, during the growth of tourism during apartheid,
competitors could leverage off of SAA’s government relationship to increase
sales.
2. S.W.O.T.
Strengths Weakness
• Government support • Historically poor image (from Government association
• Brand awareness during apartheid)
• Public relations coverage • CEO high turn over rate
• Pilots from SA air force • Financial non-stabilization
• Low moral and productivity from staff
• Dependency on fuel & foreign exchange
Opportunity Threat
• Increase in national tourism and travel, • Competition
7% post apartheid • Union strike
• Partnerships with international airlines to • Changing currency exchange rate and rising fuel cost
expand routing (Star alliance code- • Unqualified staff hiring
sharing)
• Business class lounges in key airports
(cater to growing target market of
business class traveler)

3. 3. Central Issues Statement
The 80% nationalized company, South African Airlines in South Africa, had a history of
CEO corruption, and financial instability caused by its dependency on fuel prices and
current exchanges rates. In addition, the airline was involved in the government’s post
apartheid “diversify the workforce” program, which resulted in few, but serious unfit
hiring decisions. These elements led to disgruntled internal employees who, in 2004,
performed a union strike that threatened operational shutdown for the airline. At that
point, the airline claimed that union requests for salary increases could not be met
because the additional cost would be financially detrimental to the business.
4. Significant Factors
1. External issues – Poorly predicted currency exchange rates and rising fuel
prices created financial losses multiple times for SAA, which led to many
staff layoffs and low financial performance for the airline that affected union
request and supplies.
2. Policies – Government program to diversity the workforce required SAA to
balance their staff racially to match the countries population composition.
This quota causes SAA to, at times, make poor staffing decision and also
increase training programs that required management time and expenses.
3. Personnel – miss-management of personnel and finances led to layoffs, lead to
disgruntle union workers, and strikes that caused operational shut down and
poor customer service.
4. Stakeholders – the association with SAA majority stakeholder, the
government, caused lower sales volumes at times due to damaged brand
image by association with apartheid-supported government. It also caused
partnership barriers and operational planning instability (to privatize or not)
for the airline.
5. Human Behavior – Corruption and poor management decision making caused
high CEO turn over rates, the board to become under scrutiny and inadequate
staff hiring’s which all led to low staff moral and a lack of effort to strengthen
customer service quality improvements.
5. Options/Alternatives
1. #1
 Give into the union strike requests of 8% salary increases to restart
operations.
OR
 Do not give into the Union strike request of 8%.
2. #2
 Build a regulatory board that overseas the airline’s board of
directors, executive staff and other top management.
OR
 Continue to allow a historically corrupt management system.

4. 6. solution/recommendations
1. Agree with union staff members that 8% salary increases will be granted.
This will enable operations to restart. Once this is achieved, a focus on
strategic plans to grow, improve service offering, and efficiencies should be
continued to strengthen the airlines position. An additional focus on
improving cost efficiencies on the executive staff level should be
implemented, management, and controlled. Once the core business is
stronger, customer service is improved, and spending is stabilized the
company could offer the union workers equity, in the form of reserve stock,
from the 20% of shares that the airline owns.
rd
2. Organize a 3 party board that audits, regulates and restricts management of
the airline in the favor of the airline company, the staff, customers and brand
equity.
7. Brief Implementation Approach
1. Immediately agree to increase union staff wages in order to secure operations
and customers needs. This should be followed up by a cooperation, between
the airline and union leaders, of agreements that will strengthen internal
relations and lease the staff members without negatively affecting the airlines
finances. Also transparency of finances should be implemented as we as
humbling of executive staff expenditures. A bonus of shared reserve stock
should be roved to staff members in order to begin the process of a strong
cooperation offering.
2. As the largest shareholder, the government should build a non-bias outside 3rd
party regulation board. Such members should be knowledgeable of legal,
finance, regularity environments and business management. The board should
oversea ad audit all financial and management decisions made by the SAA
board and top management to ensure that they are ethical, legal and in the best
interest of the company, staff, customers and brand equity value.
8. Rational for Recommendation
1. While keeping the customers served, transparency and more responsible
ethical execute management staff will create a more loyal staff. This is
important as the airline may face future financial declines, because of its
dependency on fuel prices and exchange rates, it will be crucial to have
support from the internal staff in order to keep operations continuing. By
offering stock bonuses the company will be displaying to its employees that
they are a significant part of the company and that SAA recognizes that if it
can excel and profit, it promises to reward their staff’s dedication. This
should increase moral and decrease poor customer service performance.
2. A regulatory board can ensure that stake holders, staff customer and future
brand equity that all decisions and action performed are legal, ethical,
authorized and 3rd party verified. This will effectively show all related

5. members that SAA does not accept corruption or mismanagement and that the
airlines future has a stronger chance of success and greater relations with their
staff and customers.
9. Contingency Plan
1. Best Case Scenario- improving working conditions, balancing finances, and
offering equity to staff improves union relations, it bring a sense of unity to
the organizational structure, and decreases chances of future strikes.
2. Worst Case Scenario – Staff members will not see the benefit to equity
ownership, the company will not become unified, and future union strikes will
cause operational shut down.
10. Relevance to marketing management
Such internal changes can be a way for SAA to re-brand itself in its competitive
market and open opportunities to gain market share. Their improved employee
relations and management system should transfer onto the brand image. This
strengthening of brand image will increase the potential to target consumer segments,
who were previously hesitant to fly with SAA due to negative brand associations.