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What are SAA’s old Airbuses worth?

Selling the aircraft is probably not a quick-fix for the airline’s financial problems.
Image: Waldo Swiegers, Bloomberg

Everybody has had the experience of a car dealer looking at an used car, shaking his head and muttering a long list of reasons why the car is not worth as much as the owner was thinking. The value usually ends up far lower than the original purchase price.

Why would it be different for aircraft?

News reports that SAA is inviting bids for nine of its Airbus A340 aircraft immediately resulted in speculation on what the aircraft are worth. The most popular figure was that all the aircraft bought new would cost R37 billion, excluding the 15 spare engines and some other specialised equipment. Even half of that would go a long way to solve SAA’s financial woes, and by extension a lot of the problems that SA is facing too.

Unfortunately, it is highly unlikely that the aircraft are worth even half the amount mentioned, even including the 15 spare engines and four auxiliary power units (the mobile units used to power an aircraft’s systems while waiting on the tarmac).

The Airbus A340 aircraft was and is not popular. It was designed as a long-range intercontinental airliner, starting production in the early 1990s. It was eclipsed by the Boeing 777 which had the advantage of delivering the same speed, range and payload with only two engines, compared with the four engines bolted onto the wings of the Airbus.

Thus, Boeing offered the same operating performance with less complexity and lower maintenance. Even the accountants at major airlines agreed and are still willing to pay nearly $100 million more for the Boeing 777 than for the Airbus A340. The Boeing sells at $350 million to $372 million, compared with the last selling price of $275 million for the Airbus.

Airbus produced the A380 in different variants, sold 377 and stopped production of the A340 in 2011. The Boeing 777 is still in production. Boeing has delivered 1 677 to date with around another 400 on order.

The SAA aircraft are quite old, even considering that aircraft can survive for ages. A quick look at the tender documents published by National Treasury shows that the aircraft have been in service since the early 2000s and some have clocked up nearly 80 000 hours.

Bids for SAA’s fleet of A340 aircraft might be low, considering technological advances, better aircraft available from the main competitor and the fact that everybody knows that SAA is desperate for cash.

It is interesting that Airbus is not that popular among SA airlines. SAA is the biggest operator of Airbus, with private charter company Global Aviation also a prominent owner of Airbus aircraft. Safair and Comair both exclusively use Boeing aircraft.

The aged financial statements from SAA also show that as at March 2017, SAA valued all of its aircraft and simulators at R11.3 billion.

It would have increased due to the depreciation in the currency from R12.60 to the US dollar to the current R14.43 as aircraft are valued in dollars, but by how much?

Calls to every possible aviation expert to get an idea of the value of the aircraft went unanswered on Thursday night, while SAA did not respond to questions either.

Several international aircraft dealers had Airbus A340s for sale, with one offering a A340-600 for $40 million. The advertisement did not give specifications such as total airframe and engine hours.

Another dealer had several A340s for sale with about half the hours of the SAA aircraft, but did not advertise the prices.

An aircraft scrapyard, AELS from the Netherlands, advertises that it “buys ageing aircraft which our skilled engineers carefully disassemble”. The parts are then sold to maintain planes that use similar parts.

The tender for SAA’s Airbuses closes on January 20. It would be interesting to see if it gets R10 billion for the lot.

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What ever we get is better than nothings, South Africans have paid enough for this failed african national corruption scheme … Funny how nothing the african national corruption touches works !! Everything falls over !! They have the Midas touch, everything they touch turns to sh$t !

Please sell SAA, the tax payers are tired of paying for SAA.

It will never improve, you cannot force this business to stay open.

It is part of the business cycle, the old closes and the new opens.

R10bn is just two years of average bailout that SAA receives. So it is less about what you get from the sale of second hand aircraft than stopping the heamoraging of money through corruption and wastage.

If they are selling aircraft they might as well just close up the whole SAA and get it over and done with.

And I really hope SAA is not planning to replace these aircraft
But, I predict one massive big mess coming regards SAA.

The aircraft are being sold because they’re excess to needs as SAA can now replace them with the A330s and A350s it has in service. Both are far cheaper to operate than the four-engined A340s, so this will represent a substantial decrease in operational expenses for the airline on those routes.

I may be wrong but I woke up at 3.00am last night with an entirely new angle on SAA.

Are they not doing what Eskom is doing, ie blackmailing SA. The reason I say this is that during all the “loss making” years the planes keep flying, at any time in SA there are about 40 SAA planes in the air, with others coming in from South America, New York, Munich, London etc.
During this time they are buying and selling, like this new plane, the A350, very efficient aircraft that is now replacing the A340s. A few billion.

How does this carry on, business as usual while we have business rescue, liquidity problems, court cases, fines and all the other shenanigans going on behind the scenes that we still don’t know about, ala Eskom. Is it not business as usual and then when there is not enough to steal they shout for a bail out, way beyond embarrassed about it just another humongous African handshake.

I see there was also a delay in selling these aircraft…..a cadre being lined up to collect a commision on the sale?

Still no explanations given for what is actually the problem at SAA, is it over leveraged, is it low passenger numbers, is it bloated staff or is it a combination of these factors?

Selling aircraft, dropping unprofitable routes and cutting back on staff may be the shock it needs o come right but hard to tell. They may be selling the aircraft and taking out a chunk of their business.

I would think that SAA looking to rebuild from the ground is maybe not a bad thing, routes like London and Cape Town are some of the most profitable in the world. I don’t think anyone is saying they must make a profit but at least limit the loss to a reasonable amount.

Even with all the mess, SAA still provides competition for a lot of routes and I wouldn’t want everyone to lose their jobs etc. I look at Air Ethiopia and it is a good example of how local African airlines can make money and compete with the big boys,

Exactly still no finger on the problem. I agree just this morning as is the case very morning there is a plane inbound from London to ORT, Durban and CT. That is +- 1200 people everyday. That is just BA.

I have had some insights into route profitability in the past and there are many routes that they fly which are very profitable and you have seen the passenger numbers.

I understand some routes are concessions such as the china ones but these should be reviewed annually on a wider economic basis.

Overall I just still struggle to see how they lose this much money. Obvious conclusion is 25 years of corruption and incompetence which is not easy to fix given the balance sheet implications they are currently feeling.

But teamed209, SAA said that the Cape Town London route was unprofitable so they cancelled it. Are you saying they were wrong?

I think they are stealing elsewhere. if 3 plus airlines fly daily to SA profitably I assume or they would not do it why can’t we? SAA was again like Eskom a jobs for pals place so fire half of them stop the stealing and I am sure it can work.

Ethiopian Air was rescued and entirely managed by American Airlines. This was till the last 5 years. Not sure it it still is

What’s not mentioned here is that SAA is not actually selling these planes with the object of freeing some funds to maintain key routes, but in order to trade up to more modern and efficient planes! Quite bizarre…

Exactly. They simply have to retire these ancient flying fuel tankers; it’s not about a fire-sale of assets, but about urgently needed fleet renewal. SAA is very late to the party in trying to offload these obsolete aircraft, though, with only Iberia, Lufthansa and SAA still operating them at any scale. Resale values will likely be very low.

Have they already identified what caused the financial problems? Have they taken action to act on these problem areas? If not, selling planes will not solve the problem.

Auxiliary power units are not mobile. They are fixed to the aircraft; they are the small turbines that provide independent power to the aircraft to operate systems and generate enough energy to start the first engine before the main engines are running.

Considering that SAA itself has been maintaining them, then they’re probably going to be bought at 20% of their value

Go into a technical agreement with(/ sell shares to) an airline that is profitable, works and is innovative, like Ethiopian Airways.

They will pick up all the problems and all that will need to done is swallow the bitter pill, which appears to be the major problem.

Take the R10 billion, shut the Airways down, give it to the Virgin man, then build homes for the poor, fix our cities, build a dam, repair potholes, and take a 100k to party, the ANC is famous for celebrating nothing!

Thats what Nelson would have done, I’m sure

But then again, had Nelson still been around SOE’s would likely be solvent, state capture would be a word in the Oxford and not a thorn in our Economy and Zuma would be Minister without a Portfolio..

Please please please sell It and shut it down!

If you check Flightradar you’ll see SAA are still flying the uneconomic A340 to New York (last night) while the newly leased A 350, acquired specifically to ply that route more efficiently, is being used as the anc short haul cadre taxi service between CT and JHB?

Doesn’t make much sense, but neither does anything the anc/ saa do.

The A350s have been flying domestically as part of their certification and entry into service. It’s standard practice for any airline introducing a new long-haul type to first fly it on short sectors for a few weeks in order to obtain all relevant certifications and ensure crews are fully up to speed.

For instance, when British Airways introduced the A380 it put them on the Heathrow to Madrid for a few weeks before scheduling them on long-distance flights.

The first A350 flight to New York will take place before the end of January, as the aircraft have just been cleared for full operational service. That’s precisely why the sale of the A340s was announced now.

Flag carriers. Remember the introduction of this one. The old, no sweet memory of that one. But it was shown of proudly and rightly.

Why did SAA and the government not immediately issue (loud) statements that SAA is still flying and open for business, while the rescue is going on?

Keeping quit is costing SAA business.

End of comments.

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