Pretoria orders SAA to revert to original A320/A330 deal

The South African Treasury has ordered South African Airways (SAA) to conclude a swap transaction with Airbus Industrie wherein the state-backed carrier will swap the purchase of ten A320-200s for five A330-300s leased directly from the European manufacturer, reports ch-aviation.

The announcement follows the expiration of an Airbus-specified December 21 deadline for the airline to have decided on a way forward for its outstanding A320 orders.

Earlier this year, the airline's board recommended the plan be amended wherein SAA would have acquired five A330-300s on sale/lease back agreements through a South African firm, and denominated in South African Rand (ZAR). Though the deal would have cushioned SAA from the impact of a depreciating Rand, it would have left it open to potentially crippling debt in the form of USD40 million worth of Pre-Delivery Payments (PDP) payable in the event the airline did not find a suitable local lessor come the December 21 deadline.

"The implementation of the deal in this manner will mean that SAA will no longer be required to pay additional PDPs to Airbus, which would have amounted to approximately USD40 million," Treasury said in a statement. "Also, as the airline takes delivery of each of the A330s, the PDPs that have already been paid, which total just more than USD100 million, will be refunded by Airbus. SAA will not be required to recognise impairments, as it will no longer be acquiring aircraft. It had been estimated that such impairments could have totalled in excess of ZAR1 billion (USD67.8 million)."

The agreement is expected to be finalised by December 28.