July 24 (Bloomberg) -- South African Airways Ltd., the continent’s biggest carrier, has asked Airbus SAS and Boeing Co. to bid for orders of 23 wide-body aircraft as it seeks to switch to more fuel-efficient planes.
“The tender has already gone to both aircraft manufacturers,” the state-owned airline’s Chief Financial Officer Wolf Meyer said today in a phone interview. “Obviously our decision will be driven by how well the aircraft suits our network requirements.”
SAA is renewing its fleet in a strategy to return to profitability after a 1.36 billion-rand ($139.5 million) loss for the year ended March 2012. The government gave the Johannesburg-based company a 5 billion-rand debt guarantee in October to ensure it can borrow from financial markets to support a recovery.
“We currently have 23 wide-body aircraft in our fleet and we will be looking to replace all of them,” Meyer said. “We will like to replace them as soon as possible. It will depend on the slots available from the manufacturers” and leasing companies and their obligations. Airbus and Boeing have few deliveries available for their most popular long-range jets after years of strong order bookings.
The airline has ordered 20 narrow-bodied Airbus A320s to be delivered over the next five years as part of the fleet renewal. It has agreed with Standard Chartered Plc’s Pembroke unit for a 12-year sale and lease-back agreement for 10 of the planes, the lender said in an e-mailed statement yesterday. The transaction is worth about $500 million, according to Meyer. “We don’t have to outlay any big capital amounts,” he said. “It will certainly have a huge cash-flow benefit for the group.”
The airline will start with the process of financing the remaining 10 Airbus A320s next week, Meyer said.
SAA’s path to profitability hinges on the strength of the rand against the dollar. About 60 percent of the airline’s bills are dollar-denominated, according to Meyer, compared with less than 50 percent of income.
The rand has weakened 13 percent against the dollar this year, the second-worst performance of 16 major currencies tracked by Bloomberg. It traded at 9.7519 to the dollar at 6:20 p.m. in Johannesburg.
“The weak rand is not positive for us,” Meyer said. “The stronger the rand, the better for us.” The airline prefers a rand below 9 to the dollar, he said, adding that they don’t target a specific exchange rate.
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