SAA201
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SAA And Jet Airbus Deal Controversy

Mon Jun 20, 2005 5:15 am

Hi all,

This article: http://www.sundaytimes.co.za/article...rticle-business.aspx?ID=ST6A125663 appeared in the South African Sunday Times Business section today.

"Airline opts for less cash in Airbus lease deal, but refuses to explain why, writes Simpiwe Piliso"

To sum things up, it basically says that SAA have leased 3 A343's at a cheaper lease rate to Jet Airways than what Sahara was prepared to pay.

Wonder if it has to do with the "MEMORANDUM OF UNDERSTANDING" announced between SAA and Jet Airways on 06 October, 2004.
http://ww2.flysaa.com/en/en_content_...rner/za_media_corner_content.jhtml
 
Leskova
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RE: SAA And Jet Airbus Deal Controversy

Mon Jun 20, 2005 5:21 am

Quoting SAA201 (Thread starter):
To sum things up, it basically says that SAA have leased 3 A343's at a cheaper lease rate to Jet Airways than what Sahara was prepared to pay.

I'm not sure, but I wouldn't be surprised if this were more or less standard practise: offer better rates to your partners than to those that you do not cooperate with - or maybe they thought that Jet was a better place to send their planes than Sahara.

Those possibilities aside, some of the decisions taken by SAA's management team are... well... strange, to use a friendly word for it.

Bit of a disappointment, seeing this great airline headed by people who really don't seem to know much about what they're doing.

Regards,
Frank
Smile - it confuses people!
 
SAA201
Topic Author
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RE: SAA And Jet Airbus Deal Controversy

Mon Jun 20, 2005 5:39 am

Quoting Leskova (Reply 1):
Bit of a disappointment, seeing this great airline headed by people who really don't seem to know much about what they're doing.

On that subject, the same newspaper also ran this today: http://www.sundaytimes.co.za/article...rticle-business.aspx?ID=ST6A125515

"... meanwhile back at the ranch, there’s dissension in the ranks"
 
Leskova
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RE: SAA And Jet Airbus Deal Controversy

Mon Jun 20, 2005 5:47 am

I guess that second article really sums SAA's problems up; at this point in time, it would probably not make much of a difference if they didn't have a single person sitting in the management offices - because those that are there right now, seem to be much more focussed on making fools of themselves, or finding reasons for getting themselves kicked out...  Yeah sure

As for the amount of complaints - it was only four flights (two longhaul, two domestic), but I just returned from South Africa on SAA on Friday morning, and I most certainly can not complain about the airline or the service I received (which is roughly the right place where I'll just somewhat point to the trip report which I posted on Friday Big grin).

I wish they'd just simply kick out the complete management team and, if necessary, poach some capable people from other airlines - or maybe "borrow" some managers from some of their partner airlines... and they better be quick about it, before one of these idiots does real longterm damage to SAA.

Regards,
Frank
Smile - it confuses people!
 
andz
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RE: SAA And Jet Airbus Deal Controversy

Mon Jun 20, 2005 5:56 am

After Monday and Tuesday even the calendar says WTF...
 
atmx2000
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RE: SAA And Jet Airbus Deal Controversy

Mon Jun 20, 2005 5:56 am

It could be some other party offered compensation to SAA for offering planes to Jet, or perhaps some decision maker at SAA got a kickback from an interested party for offering leases to Jet at a lower price than could otherwise be received.
ConcordeBoy is a twin supremacist!! He supports quadicide!!
 
Leskova
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RE: SAA And Jet Airbus Deal Controversy

Mon Jun 20, 2005 5:59 am

Andz, thanks for that link - I must have completely missed that.

Now all SAA has to do is get more capable people that way... Big grin
Smile - it confuses people!
 
prebennorholm
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RE: SAA And Jet Airbus Deal Controversy

Mon Jun 20, 2005 5:59 am

There is a lot more to "leasing" than just leasing price. Especially something called "risk".

Many years ago SAS leased an unused A300 to an operator in Egypt.

It didn't last long until the operator went bust.

While things were sorted out with the various creditors the plane was sized by the Egyptian authorities. That took six months.

When a SAS crew was finally allowed to retrieve the plane, it was hardly in flyable condition.

The plane had been standing in the desert heat for six months without having the lavs cleaned after last flight. They had an extremely smelly flight back home with a plane which needed an expensive caretaking hand in many respects, plus an entirely new interior.
Always keep your number of landings equal to your number of take-offs
 
SA7700
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RE: SAA And Jet Airbus Deal Controversy

Mon Jun 20, 2005 6:04 am

Quoting Leskova (Reply 1):
Those possibilities aside, some of the decisions taken by SAA's management team are... well... strange, to use a friendly word for it.

Most of the decisions at SAA the last couple of years have been strange. And I'm not going to be politically correct, for a change. I had doubts about CEO Ngqula from the start - his career has not exactly been stellar thus far and the guy has no airline management experience. Most likely his government comrades and cronies had a finger in the pie for him to be appointed as CEO of SAA. For heavens sake, we see it in government all the time.

I smell another Coleman Andrews debacle in the making and in the end we as South African taxpayers will be left to foot the bill.

Chartered flights and helicopter trips? Who the hell does he think he is, the national president? I don't want to be negative, but this thing is going to blow along the line with a certain somebody, yet again walking away with a hefty golden handshake.

This is so embarrassing…….

Rgds

SA7700
When you are doing stuff that nobody has done before, there is no manual – Kevin McCloud (Grand Designs)
 
LAXDESI
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RE: SAA And Jet Airbus Deal Controversy

Mon Jun 20, 2005 8:57 am

Quoting Prebennorholm (Reply 7):
There is a lot more to "leasing" than just leasing price. Especially something called "risk".

Many years ago SAS leased an unused A300 to an operator in Egypt.

It didn't last long until the operator went bust.

I totally agree, Sahara is not as strong financially as Jet Airways. Sahara's offer of 15% higher rental may not be good enough to justify the higher risk. Furthermore, SAA will get a better codeshare partner in Jet, than Sahara.

BTW, Sahara is leasing two 777s, which IMO is a better choice than A340s.
 
SAA201
Topic Author
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RE: SAA And Jet Airbus Deal Controversy

Thu Jun 23, 2005 5:31 am

From http://www.businessday.co.za/articles/topstories.aspx?ID=BD4A59439

Posted to the web on: 22 June 2005
SAA decision not based just on profit - Ngqula
Sapa


THE decision by SA Airways not to accept the higher bid in a leasing agreement was not based purely on profit motives, SAA chief executive officer Khanya Ngqula told parliament today.

SAA recently signed a leasing agreement providing three Airbus A340-300s to Indian company Jet Airways instead of with rival airline Sahara which reportedly promised a deal R110m more lucrative.

"Would I give a R2.4bn asset to a company that won't show me their balance sheet or who won't tell me who owns them?" Ngqula asked, stating that Jet Airways was a public company whereas Sahara was a private organisation.

"It's not just about money. It's also about what happens if the plane crashes, and the credit cheques of the people we are leasing them to," he said.

Ngqula has come under fire for not going with the Air Sahara deal.

Explaining his decision to the Public Enterprises Portfolio Committee, Ngqula said Jet Airways was more firmly established and as a public company its books were easily scrutinised.

"There were in fact seven other airlines interested in the deal but we had to choose one. So there were seven losers - I have yet to find a happy loser," he said.

SAA was forced to lease the new aircraft to Jet Airways for approximately three years until it had recovered financially and developed routes to accommodate them, he said.

"We did a deal that allowed us to more than break even and then get them (aircraft) back."

The airline has already had to cancel 15 aircraft on order from Airbus but said it needed these three.

"We need these planes. We know the world is buoyant in terms of travellers - we see it in South Africa," Ngqula said, predicting the market would grow enough in two years to allow SAA to get the aircraft back.

The airline is recovering from a financial loss of R8bn posted for the 2004 financial year. Ngqula said never again would this happen and predicted SAA's results, expected in two weeks, would be "very, very good".

In the first half of 2005 it was already R365m in the black and predicted revenue would grow from R17bn to R19bn by the end of the year.

"We are very, very comfortable," he said, explaining how SAA would capitalise on its financial liquidity by focusing on Africa.

He said the continent was proving to be its most profitable sector enjoying 33% profit margins.

In July SAA began new routes to Washington via Accra (Ghana) and to Livingstone in Zambia and Zanzibar. It had also applied for additional frequencies to Accra, Lagos (Nigeria) and Luanda (Angola).

"There are certain key markets we have to get into."

SAA would also be focusing on capturing Indian, Chinese and Nigerian markets and would resume flights form Johannesburg to Bangkok in October this year, Ngqula said.
 
initref
Posts: 110
Joined: Wed Nov 29, 2000 12:28 am

RE: SAA And Jet Airbus Deal Controversy

Thu Jun 23, 2005 11:11 pm

9W got a good deal on the A340 lease from SAA - and SAA had good reason to do so.

Despite B747-437B's uninformed speculation - posing as fact in this post: RE: Jet Airways (India) A340 (picture) (by B747-437B May 5 2005 in Civil Aviation)

Quote:

9W offered SAA more money (significantly above market rates) to sub-lease the aircraft for 2 years than SAA was paying Airbus. Since SAA is currently running operationally negative, the sound financial decision was to simply sublease the aircraft out and make more money doing that than by operating them in the current environment with high fuel prices.
 
B747-437B
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RE: SAA And Jet Airbus Deal Controversy

Fri Jun 24, 2005 1:01 am

Quoting InitRef (Reply 11):
Despite B747-437B's uninformed speculation

It was neither uninformed nor speculative as I am aware of the exact figures involved from both parties to the transaction.

Furthermore, even Jet Airways will admit that they are paying significantly above market rates for the A340s simply because they needed them immediately. Wait for their annual report and compare the lease rates they are paying for these 3 aircraft versus the rates they are paying for the similar new build A330s that they will be acquiring over the next few months and then see how large the difference is. Alternatively compare lease rates for similar new build A343s with other operators with similar credit ratings to the post-IPO Jet Airways and you will see what I mean.

The newspapers in SA obviously don't like Khaya and will go after him for seemingly anything nowadays. He gives them plenty of ammunition but in this case, I believe that he did absolutely the right thing and SAA wound up getting the better side of the deal financially.
"The A340-300 may boast a long range, but the A340 is underpowered" -- Robert Milton, CEO - Air Canada
 
SAA201
Topic Author
Posts: 479
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RE: SAA And Jet Airbus Deal Controversy

Fri Jun 24, 2005 1:46 am

Quoting SAA201 (Reply 10):
"There were in fact seven other airlines interested in the deal but we had to choose one. So there were seven losers - I have yet to find a happy loser," he said.

Besides Sahara, wonder who the other airlines were that were interested in SAA's A340-300's? Any ideas?
 
andz
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RE: SAA And Jet Airbus Deal Controversy

Fri Jun 24, 2005 3:14 am

Quoting InitRef (Reply 11):
Despite B747-437B's uninformed speculation

Methinks you could have picked any one of 100,000 other a.netters to call "uninformed".... except this one....
After Monday and Tuesday even the calendar says WTF...
 
whitehatter
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RE: SAA And Jet Airbus Deal Controversy

Fri Jun 24, 2005 3:35 am

Quoting Prebennorholm (Reply 7):
There is a lot more to "leasing" than just leasing price. Especially something called "risk".

Exactly.

The bottom line might have been more attractive, but SAA probably went with the deal which both suited their planning and also offered stability and transparency. If Jet offered less cash but a better all-round proposal then they would be fools just to grab the cash.

It saves on awkward questions from shareholders or embarassment down the line. Just like investing in companies like GE who don't provide vast profits but do provide reliable and steady returns on their 'blue chip' shares.
Lead me not into temptation, I can find my own way there...
 
initref
Posts: 110
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RE: SAA And Jet Airbus Deal Controversy

Fri Jun 24, 2005 4:01 am

Quoting Andz (Reply 14):
Methinks you could have picked any one of 100,000 other a.netters to call "uninformed".... except this one....

B747-437B has very good information on many topics, and pure B.S on others - but Jet Airways is not Air India and frankly there are other posters on a.net who have more information and well-placed contacts in Jet than B747-437B - and don't have to rely on press releases, GDS/CRS info about tail number movements, and airline financial releases to provide this type of info.
Jet Air In Talks To Lease Long-haul Planes (by HAWK21M Feb 16 2005 in Civil Aviation)

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