TIMELINE: The controversial SAA-Airbus deal

By Drum Digital
18 December 2015

The R6bn Airbus aircraft deal has continuously been placed under the microscope. Here's a timeline of the controversial deal.

2002 - SAA and DPE (Department of Public Enterprises) award a contract to Airbus to modernise SAA's long-haul and regional/domestic fleet, replacing much older aircraft over a 12-year period from 2003 - 2015.

Under the contract, SAA would acquire the following aircraft:

6 x A340-600s purchased from Airbus plus

3 x A340-600s leased from a leasing company

6 x A340-300s purchased from Airbus

11 x A319s purchased from Airbus

15 x A320s purchased from Airbus

plus 6 x A340-200s leased from Airbus

The 6 x A340-200s were later replaced with new A330-200s leased from AirCastle

2009 - SAA renegotiates the A320 element of the contract, increasing the number of A320s to be acquired from 15 to 20. The additional capacity was required to meet envisaged growth on existing domestic and regional flights, but also to meet demand on the airline's new intra-Africa route network, which was the core of its new business strategy.

2012-2014 - The first 10 A320s are delivered to SAA

2012 - 2013 - Facing cost pressures linked to the high oil and jet fuel prices, SAA launches a tender for the supply of new, cost efficient long-haul aircraft. The tender process is stopped by the then Minister of Public Enterprises, Malusi Gigaba after the Department of Trade and Industry publishes revised rules for the National Industrial Participation Programme (the statutory offset mechanism applied to all procurements of goods or services by the State or SoEs with a contract value exceeding $10m).

2014-2015 - SAA launches its Long Term Turnaround Strategy, which addresses some changes to the airline's Africa route network strategy. At the same time, SAA's financial performance comes under pressure due to the deterioration of South Africa's economy, and the depreciation of the rand.

As a result, SAA (under the stewardship of acting CEO, Nico Bezuidenhout) approached Airbus to discuss a renegotiation of the 2009 terms for the A320s and also possible swap of the A320s for a smaller number of modern long-haul planes.

2015 - SAA and Airbus agree to an arrangement where the purchase of the remaining 10 A320s would be converted to a lease of 5 x long-haul A330s from Airbus. At the same time, Airbus would refund to SAA the pre-delivery payments it has made on the outstanding A320s and it would also absolve the airline of any future pre-delivery payments in respect of these aircraft. This would immediately put SAA back into a cash-positive position.

Treasury approves the proposal, but SAA's board and chairperson, Dudu Myeni, refuse to sign off on it.

Oct 2015 - SAA's chairperson proposes that Airbus sell the A330s to an African leasing company, which would then lease the aircraft to SAA. Airbus rejects the proposal as it fails to meet its internal compliance standards.

Oct/Nov 2015 - SAA chairperson announces a variation of the proposal in briefings to Parliament's Joint Standing Committee on Finance and Public Enterprises and says the airline wants a rand-denominated lease as this would have lower forex risks for SAA.

Nov 2015 - SAA applies for an urgent gag order to prohibit the media from publishing the contents of an internal memorandum which would show SAA’s precarious financial position relating to the Airbus swap deal.

02 Dec 2015 - Treasury issues a news release in which the (then) Finance Minister Nhlanhla Nene tells SAA's chair and board to proceed with the fleet swap/pre-delivery payment refund arrangement it had signed off on earlier in the year.

Treasury says SAA has failed to produce any evidence to demonstrate SAA would be in a better off financial position if it pursued the arrangement proposed by the SAA Chair and board.

02 Dec 2015 - Police start probe into SAA

09 Dec 2015 - President Jacob Zuma sacks Nene as Finance Minister.

09 Dec 2015 - As things currently stand, the 2009 revisions to the 2002 contract are still enforceable, that is for SAA to purchase a total of 20 A320s, 10 of which are due for delivery from 2016.

17 Dec 2015 - Media scores huge victory when the High Court sets aside the gag order on the secret internal memo.

21 Dec 2015 - Deadline for the payment of the next round of pre-delivery payments on the 10 x A320s

Source: Fin24

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