yul332LX
Posts: 798
Joined: Sat Feb 07, 2004 5:15 am

SAA Overpaying For Leases Of Boeing Aircraft

Thu Jun 23, 2005 10:47 pm


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.

...

http://news.airwise.com/story/view/1119479813.html
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United Airline
Posts: 8771
Joined: Wed Jan 10, 2001 5:24 pm

RE: SAA Overpaying For Leases Of Boeing Aircraft

Fri Jun 24, 2005 2:00 am

Not very good. Hope they can renegotiate better deals...

Guess they will renew the lease in 2006

[Edited 2005-06-23 19:02:27]
 
gigneil
Posts: 14133
Joined: Fri Nov 08, 2002 10:25 am

RE: SAA Overpaying For Leases Of Boeing Aircraft

Fri Jun 24, 2005 2:03 am

Quoting United Airline (Reply 1):
So what Boeing aircraft do they plan to lease more?

What?

N
 
andz
Posts: 7626
Joined: Mon Feb 16, 2004 7:49 pm

RE: SAA Overpaying For Leases Of Boeing Aircraft

Fri Jun 24, 2005 3:20 am

Maybe if the CEO looked at his own extravagance he might help the company in returning to profitability. Every bit of cost cutting helps....
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whitehatter
Posts: 5180
Joined: Sat Jun 12, 2004 6:52 am

RE: SAA Overpaying For Leases Of Boeing Aircraft

Fri Jun 24, 2005 3:29 am

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.
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ual747-600
Posts: 593
Joined: Fri Sep 24, 1999 12:57 pm

RE: SAA Overpaying For Leases Of Boeing Aircraft

Fri Jun 24, 2005 3:31 am

How is a 340-300E worth $925,000 per month and a 747-400 worth only $450,000 per month???

UAL747-600
 
SA7700
Posts: 2936
Joined: Thu Dec 18, 2003 9:38 pm

RE: SAA Overpaying For Leases Of Boeing Aircraft

Fri Jun 24, 2005 3:42 am

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...

Rgds

SA7700
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MidnightMike
Posts: 2810
Joined: Thu Mar 06, 2003 10:07 am

RE: SAA Overpaying For Leases Of Boeing Aircraft

Fri Jun 24, 2005 4:05 am

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.

Just like a car, when I signed the papers for my lease car, I was happy, about a year later, the rate was about $75 less per month.....
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Planesmart
Posts: 1766
Joined: Sun Dec 05, 2004 3:18 am

RE: SAA Overpaying For Leases Of Boeing Aircraft

Fri Jun 24, 2005 4:36 am

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.

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