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