Cape Town - An unfavourable lease agreement for SAA's fleet of Boeing 787-800 aircraft, negotiated when American Coleman Andrews was chief executive, expires soon and the airline is in talks with both Airbus and Boeing over possible replacements.
It is paying more than the current market rate for the Boeings, which it uses on domestic and regional routes, and the leases expire between 2010 and 2012. According to a statement issued by the airline yesterday, an order it gave in 2002 for 15 Airbus A320 aircraft for future delivery would have the same disadvantage.
However, according to Linden Birns, Airbus's spokesperson in southern Africa, the European plane maker is willing to renegotiate the delivery price for the A320s. "There is no dispute between us and we have been discussing this for some time," he said. "There is every indication that it will be finalised very soon."
Birns said the A320s were ordered as part of a package to supply SAA's current long-haul fleet of Airbus A340s, plus Airbus A319s and A320s, and the prices had been agreed as part of this deal. It was intended at the time that SAA should have a uniform fleet all of the same make.
Andre Viljoen, who was SAA's chief executive at the time, explained that since Airbus aircraft had almost identical controls this would increase efficiencies and reduce costs, because all its pilots would be qualified to fly all its aircraft and it would stock only one make of spare parts.
However, by 2004 SAA was in financial difficulties that caused it to have to lease two of its newly delivered Airbus A 340s to Indian carrier Jet Airways. It wrote to Airbus cancelling the order for the A320s.
SAA informed the government of the action and said that predelivery payments of $53 million (R425 million at yesterday's exchange rate) would be forfeited, adding that it no longer required the funds it had requested for the purchase.
Airbus acknowledged the receipt of SAA's letter, but did not agree to the cancellation of the order. The plane maker has requested a further payment of $720 million.
Robyn Chalmers, the head of corporate affairs at SAA, said yesterday that the airline was in negotiations with both manufacturers. It had asked Airbus that, if it went ahead with the order for A320s, the predelivery payments it had forfeited would go towards the purchase price.
Of these payments, $10 million was returned to SAA for the retrofitting of lie-flat beds in the A340s.
"SAA will consider the viability of both companies' suggestions prior to concluding on its options with respect to the Airbus matter," Chalmers said.
"Should SAA elect to pursue its belief that the Airbus contract is cancelled, there is a remote possibility that the costs to exit may exceed forfeiture of the predelivery payments only. It is impossible to quantify any potential liability in this regard."