YUL332LX From Canada, joined Feb 2004, 820 posts, RR: 1 Posted (9 years 8 months 1 week 5 days 16 hours ago) and read 3576 times:
South African Airways (SAA) is leasing at least 4 Boeing aircraft for double their market price under contracts entered into by its previous management, the company said on Wednesday.
SAA Chief Executive Khaya Ngqula said the state-owned carrier was paying USD$900,000 a month each for the Boeing 747-400s when the current market price was only about USD$450,000.
The lease contracts were entered into by previous management and would run until the end of 2006, adding to operating costs as the company struggles to return to profitability after years of heavy losses, he said.
WhiteHatter From , joined Dec 1969, posts, RR:
Reply 4, posted (9 years 8 months 1 week 5 days 11 hours ago) and read 3290 times:
Not enough detail.
There is no breakdown of just what is involved, and on what basis the 'double' statement has been arrived at.
For instance a fresh D checked 744 with low hours, against one which is 15 years old or similar. There is also nothing about how the leasing has been done. Is there some kind of risk loading which was necessary at the time we are not aware of? Are engines included in the deal or leased separately? Lease guarantee insurance? Offshore corporations?
Before anyone starts pointing the finger and making any allegation of corruption or incompetence then there are so many issues which have to be looked into and the article doesn't reference anything like that.
SA7700 From South Africa, joined Dec 2003, 3431 posts, RR: 26
Reply 6, posted (9 years 8 months 1 week 5 days 11 hours ago) and read 3273 times:
AIRLINERS.NET CREW HEAD MODERATOR
Well the new CEO is not off to a good start anyhow, the South African media is stepping on his gas pedal already - chartering aircraft and helicopters for himself while we as taxpayers have to foot the bill?
I don't like it, plain and simple...
When you are doing stuff that nobody has done before, there is no manual – Kevin McCloud (Grand Designs)
PlaneSmart From New Zealand, joined Dec 2004, 1194 posts, RR: 0
Reply 8, posted (9 years 8 months 1 week 5 days 10 hours ago) and read 3177 times:
Quoting WhiteHatter (Reply 4): For instance a fresh D checked 744 with low hours, against one which is 15 years old or similar. There is also nothing about how the leasing has been done. Is there some kind of risk loading which was necessary at the time we are not aware of? Are engines included in the deal or leased separately? Lease guarantee insurance? Offshore corporations?
Quoting MidnightMike (Reply 7): Perhaps when SAA signed the agreement, that was the market rate, or, perhaps SAA had bad credit and had to pay a higher fee to secure a line of credit.
Exactly. You can't compare deals unless you know all the facts. Some lease deals include equipment & services that in other countries would be treated as revenue expenses and charged to P&L. Tax rules influence behaviour. What hours / cycles are included? Does the cost include local taxes?
There would also be a country risk component.
The leasor's financial position would also determine costs which have to be passed on to SAA.
Some leases have a credit / refund component at termination for under-utilisation.
SAA are giving a less than subtle message to the leasor and B. To the leasor, it's you better have a sharp pencil ready in 2006 if you want the leases extended. And to B, it's if you want SAA to remain a 744 operator, and 747ADV prospect, you better assist the leasor.