SAA may run short of planes for local routes

2011-03-05 09:05

South African Airways (SAA) urgently needs to find eight aircraft, or risk having too few to continue domestic operations next year.

The national carrier’s leases on most of the planes in its fleet of Boeing 737-800s come to an end in 2012 – but SAA’s replacement fleet is ­being delivered only from 2013.

The airline currently uses about 20 of the Boeings on its ­domestic and regional routes, and having eight planes fewer could prove ­catastrophic for business.

In reaction to the impending ­crisis, the airline has issued an ­urgent request for expressions of interest (RFI) for the lease of up to eight A320 aircraft for delivery under an operating lease to SAA in calendar year 2012.

The RFI says that the airline wants to lease the planes for between 10 and 12 years.

SAA spokesperson Fani Zulu says the problem is that delivery dates for the new aeroplanes were not synchronised with the lease ­expiry dates of the Boeings.

“Part of this was due to the fact that the contract with Airbus for the new A320s was renegotiated,” says Zulu.

The contract was renegotiated in 2008 when SAA discovered that the original contract for 15 new ­Airbus A320s, worth around $727 million (about R5billion), which it had believed had been ­cancelled, was in fact not.

Airbus informed SAA that it was still liable for the contract.

According to the original contract, signed in 2002, Airbus was to have delivered the 15 aircraft to SAA in 2010/2011.

SAA decided to cancel the order in 2004 when it faced bankruptcy after hedging losses of R6 billion wiped out its capital base.

The cancellation was never officially confirmed by manufacturer Airbus, however, which led to the two companies renegotiating the deal in 2008. SAA then increased its order to 20 aircraft.

Zulu says the airline is trying to avoid a situation in which its lease runs out with no replacement ­aircraft being available.

“We are now considering two options. One is in essence a swap that would require the lessor to accept delivery of the SAA-ordered aircraft in exchange for SAA entering into a long-term lease with the lessor in respect of the lessor’s aircraft. The second option is to enter into short-term leases that would range from a few months to a year. The second option would probably be more expensive, though.”

The RFI states that SAA has A320 aircraft on firm order from Airbus for delivery in calendar years 2013, 2014 and 2015.
It states that “SAA requires ­delivery earlier than the scheduled delivery dates under its contract with Airbus”.

It further states that the airline is seeking “interested parties who are aircraft lessors with firm orders for A320-type aircraft with Airbus for delivery within the timeframes specified to confirm interest in leasing such aircraft to SAA under a ‘swap-out’ arrangement with SAA in terms of which they will take over SAA’s obligations to acquire SAA’s aircraft under the SAA Airbus contract on a one-for-one basis”.

Sake24 understands that the airline would prefer to enter into a lease arrangement as this would place less stress on its already weak balance sheet, but this was not confirmed by the airline.

An independent analyst is worried about the timing of the RFI.

“The issue is that SAA might struggle to find lessors at such short notice. It’s only months away from the first delivery date,” the ­analyst says.

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