SAA-Airbus Swap Deal Goes Just The Way Nene Wanted It

SAA-Airbus Swap Deal Goes Just The Way Nene Wanted It

A South African Airways leasing agreement with Airbus has been settled just the way former Finance Minister Nhlahla Nene wanted it, BizNews reports.

Many South Africans believe Nene was fired by President Jacob Zuma in part over disagreements in renegotiating the SAA-Airbus deal. Critics say a deal preferred by SAA Chairwoman Dudu Myeni would have been wasteful and cost South African taxpayers millions of rand.

Nene ordered SAA to proceed with a leasing arrangement on Dec. 3. Nene was fired six days later by Zuma, whose personal foundation is run by Myeni. Nene was replaced by a relatively unknown MP, David van Rooyen. Pravin Gordhan replaced van Rooyen days later, and said that SAA-Airbus Nene’s decision stood, Bloomberg reported.

France-based Airbus manufactures civil aircraft with production and manufacturing facilities mainly in France, Germany, Spain, China and the U.K.

If Myeni had her way, the Airbus swap deal could have threatened the financial stability of SAA, Fin24 reported.

SAA says now the transaction is being processed as directed by Gordhan and will be concluded by Dec. 28, the South African treasury said in a statement.

According to Nene’s approved plan, SAA will swap the purchase of 10 A320 aircraft for a lease of five A330-300 aircraft from Airbus.

This means that SAA will no longer have to pay additional pre-delivery payments to Airbus, which would have amounted to about 603 million rand ($39.7 million USD).

The SAA board conceded defeat to the South African treasury Monday after Finance Minister Gordhan concluded the swap transaction with Airbus in line with approval granted by Nene.

After his appointment, Gordhan gave SAA an opportunity to make its case, then decided that the airline must go ahead with executing the A320-A330 swap as Nene wanted it, the treasury said.

When SAA takes delivery of the A330s, Airbus will refund pre-delivery payments that have already been paid totaling more than $100 million, according to the treasury.

“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 totaled in excess of 1 billion rand ($65.75 million US),” the Treasury said.

Nene fell out with Myeni over the deal, Fin24 reported. The former minister insisted the deal continue as approved. Myeni and the SAA board wanted to change the transaction to allow SAA to buy the A330-300 aircraft and do a sale-and-leaseback deal.

Nene told SAA on Dec. 3 to implement the transaction structure he had approved.

The SAA board allegedly ignored this request and on Dec. 9, Zuma — Myeni’s close friend — fired Nene and replaced him with the unknown van Rooyen. Four days later, Gordhan rescued Zuma from an economic crisis by stepping back into the Minister of Finance role that he held previously.

The Airbus deal was the first major test for Gordhan since returning to the treasury, Fin24 reports.

The deal, originally reached in 2002 and renegotiated in 2009, required SAA to make pre-delivery payments of $40 million on new Airbus aircraft by Dec. 28.

Nene wanted to relieve SAA of this obligation.

Instead the SAA board failed to ratify the deal (until Monday), and Myeni proposed a new structure, meaning SAA was once again liable for the $40 million, Fin24 reported.

Zuma denies Nene’s firing was connected to the Airbus deal.

Gordhan promises to stabilize SAA.