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SAA awaits state go-ahead for airbus deal swap

The preference for A330 planes will be more suitable for routes to the Middle East.

South African Airways is seeking government approval to replace an order for 10 Airbus Group NV A320 planes with a lease of five larger models as the state-owned carrier battles to repair its finances.

The preference for A330 planes will be more suitable for routes to the Middle East and will boost the balance sheet by about R2.8 billion ($231 million) in liquidity and impairment savings, Acting Chief Executive Officer Nico Bezuidenhout said in an interview in Abu Dhabi on Monday. The changes are part of a 90 day turnaround plan that ended last week.

“The aircraft’s size and range suits SAA’s network, especially for these eight to nine hour flight ranges,” Bezuidenhout said. “That transaction allows us to remove that hangover that came with the A320s.”

SAA has a support guarantee from the National Treasury to continue as a going concern even as net losses widened to 2.55 billion rand for the year through March 2014. It closed unprofitable routes to Beijing and Mumbai this month and saved about 236 million rand renegotiating service contracts, below a target of 250 million rand.

A plan to save R290 million a year by reviewing the leases on eight Airbus A340 long-haul aircraft has become less urgent as the falling oil price lowers the cost of fuel, Bezuidenhout said. “We’ve got the luxury of a bit more time, but the problem remains and we’re going to have to resolve it,” he said.

Bezuidenhout was speaking after SAA’s first flight to Abu Dhabi from Johannesburg, which will be a daily service. The carrier has forged an alliance with Gulf carrier Etihad Airways PJSC and will share services on 49 routes.

©2015 Bloomberg News

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