(Bloomberg) — South African Airways (SAA) is close to a 1.25 billion-rand ($107 million) savings target after renegotiating airline leases and supply contracts, canceling two long-haul destinations and reviewing the route of Washington D.C. flights.
The state-owned carrier will save 290 million rand a year after extending the leases on eight Airbus Group NV A340 aircraft and a further 600 million rand when unprofitable routes to Beijing and Mumbai close at the end of March, Acting Chief Executive Officer Nico Bezuidenhout told reporters in Johannesburg on Monday. Including 250 million rand in savings from 180 service contracts covering spare parts to call centers, the company is close to the target set by the government late last year.
“I’m happy with the savings,” Bezuidenhout said at SAA’s headquarters. “I’ll be much happier when they start to materialize. I’ll be much happier when I can put a finger in a hole and another hole doesn’t open.”
SAA has a support guarantee from the National Treasury to continue as a going concern even as it said last month that net losses widened to 2.55 billion rand for the year through March 2014. It’s more than half way through a 90-day turnaround plan aimed at reducing costs and operating without government help.
Flights to Washington D.C. will soon no longer touch down in Senegal on their way to the U.S. capital because the West African country is too small a market, Bezuidenhout said. SAA is seeking an alternative stop-off point that will save as much as 200 million rand a year. That could become a regional hub for West Africa, he said, without naming possible cities.
The airline is also in late-stage talks with Airbus about canceling an order for 10 A320 planes — part of a 20-plane purchase placed in 2002 — and replacing them with the lease of five A330 models, according to Bezuidenhout. That would boost the carrier’s liquidity by about 1.4 billion rand, he said.
The acting CEO, who is also head of low cost unit Mango Airlines SOC Ltd., was appointed in November after Monwabisi Kalawe was placed on special leave. “Progress is being made” on the future of the position, Bezuidenhout said.
