SAA reroutes on new fleet proposal - CNBC Africa

SAA reroutes on new fleet proposal

Southern Africa

by Thando Matutu 0

Airline jumbo-jet. PHOTO: Getty images

Minister Gigaba has ordered the South African Airways (SAA) to restructure the Request for Proposals (RFP). The RFP made last year requested a tender worth 60 billion rand to acquire an order of 23 new long-haul aircrafts.

“In the original specifications we were very broad. We would have given points to a tenderer who indicated [the creation of] business in South Africa for industries within the aviation sector. [However now] the successful bidder must assist South Africa in setting up manufacturing facilities and create employment,” Monwabisi Kalawe the chief executive officer of SAA told CNBC Africa.

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Kalawe believes the turn-around strategy will work and hopes the deadline for the bid will be October 2014.

“We have engaged with the engineering manufacturers, the airframe manufactures and the suppliers and it can work,” he said.

(READ MORE:S.Africa’s aviation industry at risk of losing domestic investment)

The country's national carrier has been making a loss in profit in recent years and it is believed the trend will continue in 2014. Losses have been previously caused by maintenance costs and the hedging of fuel due to the depreciation of the rand.

”We estimated that 60 per cent of our expenses are dollar denominated. Revenue is between 35 per cent and 40 per cent dollar dominated. We don’t have the natural hedge, our finance team is working on hedging to mitigate the impacts of the weakening rand,” he said.

However, in 2013 SAA reported an increase of commercial sales revenue growth of 12 per cent, a financial total income growth of 14 per cent and were awarded the Skytrax Award for best African airline for the 10th consecutive year. 

The Abuja aviation declaration has been inconclusive about policies of open skies, and SAA believes that this can deter its progress into African aviation markets.

“The small airlines in Africa feel threatened that larger airlines such as SAA [and] Air Kenya will dominate the market base. The African Union, together with the African Airline Association are engaging to mitigate the risks,” he said.

(READ MORE:Africa’s aviation future lies in safety and affordability)

With the current trend being international countries investing in African business, the aviation sector is no exception.

“There are Middle-Eastern couriers which are deploying the latest equipment into Africa and setting up partnerships with African countries. There is potential for these countries to set up aviation hubs which can compete with OR Tambo Airport. They could be taking up equity stakes in the airlines, so African aviation is going to be very tough,” he said.

Irrespective of the developments within the African aviation markets, SAA aims to work hard on their turnaround strategy.

“Our focus is to drive the balance sheet, drive operation efficiencies, the fleet, the network to make us market competitive, strengthen the SAA brand in the minds of our customers and focus on customer services which have been inconsistent,” said Kalawe.

BY:THANDO MATUTU

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