Julius Baumann
8 September 2008
Johannesburg — A DISPUTE between South African Airways (SAA) and Airbus is brewing over outstanding payments for 15 Airbus A320 jetliners.
The aircraft manufacturer is demanding millions of dollars in predelivery payments for an order SAA claims it cancelled in 2004. As a result SAA has had to make provision for an additional $727m for possible payments to Airbus at a time when the airline is already undercapitalised and is in talks with the government for more funds.
The 2008 annual report said the airline had secured a R1,3bn subordinated loan in 2007 guaranteed by the government.
In March this year a further R1,56bn subordinated loan was secured, also guaranteed by the government. At the same time the government paid SAA an additional R653m to help with its restructuring.
If SAA is made to pay outstanding fees to Airbus, it will probably require additional capital from the government.
In the annual report SAA writes that in 2004 it requested the order of 15 Airbus jets made by former CEO Andre Viljoen in 2002 be cancelled.
The manufacturer acknowledged receipt of the letter but did not comment on the cancellation. SAA assumed the order had been cancelled and told the public enterprises department and the treasury so.
Approval for the acquisition was withdrawn.
SAA said at the time that it was of the view that the price of cancellation was the forfeiture of the predelivery payments made up to that point and hence these payments were impaired in the 2004 financial year.
However, this year Airbus approached SAA for further predelivery payments as it did not regard the order of the 15 jets as cancelled.
"We are exploring various options with SAA which would enable it to acquire Airbus aircraft which the airline may deem to be better suited to its new business model," Linden Birns, Airbus's local spokesman, said yesterday.
"We would not classify this as a dispute . This is the subject of an ongoing negotiation which we hope to finalise soon."
SAA spokeswoman Robyn Chalmers confirmed that negotiations with regard to the A320 aircraft were still under way. "A capital commitment note in respect of the 15 A320s has been included in the annual financial statements," she said.
SAA said in the annual report that it was weighing up its options, but regarded the contracted price of the aircraft as unfavourable.
SAA plans to modernise its fleet and has put out a request for information to Boeing and Airbus and has asked that Airbus incorporate the previously paid predelivery payments into any new order.
It is not clear whether Airbus has accepted this, but it indicated to SAA that the price of the aircraft could be renegotiated, according to the annual report.
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