South African Airways to Buy New Planes Amid Funding Review

South African Airways SOC Ltd. is readying an order for new planes as the government reviews the carrier’s finances to ensure it remains sustainable.

SAA, as the national airline is known, wants to renew its aging fleet with more fuel-efficient long-haul aircraft. An initial tender for wide-bodied planes was withdrawn last year to refine requirements for the supplier to promote local industrialization, SAA Chief Executive Officer Monwabisi Kalawe said.

“The target to complete the acquisition is the end of the current calendar year,” Kalawe told reporters in Cape Town today.

SAA posted a 991 million-rand ($92 million) operating loss in the year through March 2013, which it attributed to soaring fuel costs, a weaker rand and unprofitable routes. The carrier says it’s undercapitalized and needs government support to remain viable.

Public Enterprises Minister Lynne Brown, who oversees SAA, said her department and the National Treasury are considering how to ensure SAA and state-owned South African Express Airways remain going concerns.

“It has become clear to me that simply extending state guarantees to the airlines is an inadequate response to the challenge and an extraordinary intervention is required to put them on a sustainable footing and to support their turnaround efforts,” Brown told reporters in Cape Town. “It might mean we have a different business model that rationalizes the two companies. SAA is a national asset, it’s a strategic asset.”

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