Transnet to sell SAX ??? [Archive]

JetNut

20th Jun 2007, 09:11

As far as I can remember the fact that SAX is now on the books of Transnet is a recent development. Originally on SAA's books. Government will probably take SAX back, but this is all smoke and mirrors/creative book keeping.

The only way govt. can shed expenses is to hand over business units to private enterprise. Such as the recent acquisition of Transnet housing by FNB.

I always thought that SAX should have been South Africa's next low cost carrier years ago, way before Mango, by simply rebranding and adjusting the business model. Interesting times ahead.

Deskjocky

20th Jun 2007, 11:28

As far as I can remember the fact that SAX is now on the books of Transnet is a recent development. Originally on SAA's books. Government will probably take SAX back, but this is all smoke and mirrors/creative book keeping.

SAX has been on Transnet's books for quite a while now, at least since they bought the Thebe shares out. Currently SAX still resides within Transnet until a bill is passed in Parliament to transfer it to the DPE. This is the same process that was followed for SAA. SAX has never been on SAA's books-ever.
I hardly see where the smoke and mirrors fits into this:confused:

The only way govt. can shed expenses is to hand over business units to private enterprise. Such as the recent acquisition of Transnet housing by FNB.

Thats why Transnet has been trying to sell SAX for the last year or more- no takers. Hence the move to the DPE. Investors are not stupid- aviation is no place to gamble right now.

always thought that SAX should have been South Africa's next low cost carrier years ago, way before Mango, by simply rebranding and adjusting the business model. Interesting times ahead.

No can do, scope limitation agreements between SAA and its SAAPA cancel this as an option. The only way this would happen is if SAX gave up their agreement with SAA- that’s definitely not going to happen so the whole thing is a non-starter. The irony to this whole thing is that this same agreement was a stumbling block in the creation of Mango yet the pilots endorsed the deal- a deal that is far more prejudicial to the long term well being of the pilot body than any expansion of SAX would ever have been. Wonder if any hard questions have been asked about that. Everybody can make up their own mind, I just remember who was lurking around the project offices over that time….:suspect:

JetNut

20th Jun 2007, 14:10

Interesting what you say about Mango. 90% of the reason for the creation of Mango was to save the bank accounts of SAA over 60's. I'm sure management at SAA would have never come up with a plan like that on their own (too short-sighted), these geriatrics had it planned all along, desperate times, especially when you're supporting a couple of ex's and a truck-load of kids.

Mango is a spin-off from the over 60's negotiaitions at SAA. The old-timers did get an extension to 63 though, with some very highly paid boy-pilots out there.

This is why SAX couldn't feature in the low-cost scene, no vested interest by the old guys. SAX is an established infrastructure and just wouldn't work. Yet again the invisible hand of the free market system is dealt a deft blow by the guys who've had good for the past 40 years in South Africa.

what did all that mean for me....another 15 years before command!!! :{

Deskjocky

20th Jun 2007, 15:19

Nice conspiracy theory there but I’m afraid it was not some devious plot thought up by the geriatrics- the pilot negotiations and subsequent recruitment were virtually the last items on the project plan- there were a few options if the pilots wanted to block the process, however, we were lucky and we just took advantage of the prevailing circumstances. I was absolutely amazed that the pilots bought the deal. SAA can get out of the short haul market tomorrow and the pilots could do nothing about it. Not that I think that’s going to happen but the option now exists to balance the narrow body fleet more evenly across both brands, with Mango having a 70% cost advantage over SAA it doesn’t take a rocket scientist to work out where things will end up long term.

nosecone

20th Jun 2007, 15:33

Should SAX be sold "to the highest bidder" what then? :confused:
Exactly how secure is the job environment at SAX? :oh:
How would this affect the supply and demand ratio that at this moment is in favour of experienced pilots? :{
What can the aircrew do to turn things around? :ugh:
In fact is anyone concerned about this? :zzz:

Al Kida

20th Jun 2007, 16:34

Not that I think that’s going to happen but the option now exists to balance the narrow body fleet more evenly across both brands, with Mango having a 70% cost advantage over SAA it doesn’t take a rocket scientist to work out where things will end up long term.

Similar to what has happened with QANTAS and JETSTAR. If I understand it correctly, if you want a command in QF, you first need to go JETSTAR, do your command there (at reduced pay) and wait for a slot in mainline.
Saves a bit of money:\

reptile

20th Jun 2007, 18:28

No can do, scope limitation agreements between SAA and its SAAPA cancel this as an option
There is no written scope clause agreement between SAA and SAX. The limitation is between SAAPA and SAA. This matter was tested when SAX introduced the 74 seat Q400.
This is why SAX couldn't feature in the low-cost scene, no vested interest by the old guys Oh contraire mon ame.....SAX is already featuring on the low cost scene - under cutting all of the low cost carriers on competing routes (and still making a healthy profit to boot)
BTW: SAX is hard on their way to introduce age 65 retirement.

Q4NVS

20th Jun 2007, 20:04

As for the healthy profit - I doubt it, more like creative accounting.

Believe what you like - the "Smoke and Mirrors" theory is only supported from the outside. The guys/gals on the inside "know" the real situation.

I have seen the figures presented to Transnet and DPE (prepared by external auditors and cross-checked by Transnet).

They are GOOD!

In fact, Actual Performance versus Budget forecasts for 2006/2007 Financial Year range between 9% and 44% exceedance, depending on which you are looking at.

Some "teazers" which the Business Day will never publish (as these do not sell as many newspapers as all the negative publicity):

Actual Revenue for 2007 = 36% Higher than 2006
Operating Profit for 2007 = 44% Higher than 2007 Budget
Actual Cash Flow = 26% Higher than 2007 Budget

Job Security? Well, let's just say that at the moment SAX is finding it difficult to find "enough" suitably Qualified pilots to employ....

:ok:

Avi8tor

21st Jun 2007, 04:59

SAX profit? Lets wait to we see the full trading statements. I refer everybody to read the articles:

http://www.businessday.co.za/Articles/TarkArticle.aspx?ID=2584324

SAX has huge maintance coming. NO provision in its last statements, wonder if its in this years books?

And also before the bubbly is on ice, OPERATING profile is that BEFORE you have paid your aircraft. Lets see if in the fine print we find SAX recieved more of YOUR tax payers ZAR's.

Like SAA's profits, its all smoke and mirriors. If SAX was making any money, Comair would not have walked away. And NO other interest is forth coming.

fluffyfan

21st Jun 2007, 07:08

DJ
with Mango having a 70% cost advantage over SAA it doesn’t take a rocket scientist to work out where things will end up long term.

Have Mango managed to source any more aircraft yet? not so easy when you have to source and pay for those things yourself, it must be easy when they are given to you.

SAA can get out of the short haul market tomorrow and the pilots could do nothing about it.

How would all the connecting passengers get to where they are going? on Mango? I can see the look of horror of the businessmans face as he gets out of his Business class seat and squashed into an Orange Jet with a packet of peanuts in his hand, I was under the impression that Mango was marketing to a new market, I hope thats the truth and not another lie from management

Q4NVS

21st Jun 2007, 07:43

And how about this bit of poor risk management?
Airlines must pay for a “C-check” full-service maintenance on leased aircraft at the end of a lease, to ensure the plane is in top condition. Experts say this can cost up to R8m an aircraft. Yet SA Express, which has a fleet of 16 aircraft, has not set aside a cent for this full-service overhaul because “it is not practical to quantify the costs of restoration”.
Is that prudent? This year alone, leases on at least three of its aircraft expire and, with no provisions, SA Express will rack up large maintenance costs soon.
Blah-Blah-Blah

Does this journo know the details of Lease Agreements for the 4 additional CRJ's? If he did, he would not boast about things he "stumbled" upon...

Lets just say that a significant % discount on Lease Rates makes R8 mill per C-Check insignificant, does it not...? Especially considering that SAX does C-Checks on a monthly basis, so surely they know the costs involved.

Discussion closed :oh:

nugpot

21st Jun 2007, 07:47

Lets see if in the fine print we find SAX recieved more of YOUR tax payers ZAR's.

Your ignorance is showing. Sax has never received capitalisation from the government. Every cent was borrowed and they are well on the way of paying that off.

Talking of paying aircraft. Most of SAX's aircraft are leased, which means that the cost of aircraft is actually reflected in the operating budget. That means operating profit is a lot better than you make it sound.

And Jetnut, Deskjocky is correct. SAX has never belonged to SAA. There is also no limit in the current commercial agreement as to size of aircraft - which is why we can operate 737's and DC9's when required. SAX just knows its market and realises that 70-90 seats and high frequencies are the way to go.

Deskjocky

21st Jun 2007, 08:27

Fluffy,

Have Mango managed to source any more aircraft yet? not so easy when you have to source and pay for those things yourself, it must be easy when they are given to you.

Actually Mango has been offered a number of 738's on lease external to SAA, as well as a few more via another option- believe me aircraft are not the problem here. In addition, negotiations are underway to move more SAA aircraft to Mango.

How would all the connecting passengers get to where they are going? on Mango? I can see the look of horror of the businessmans face as he gets out of his Business class seat and squashed into an Orange Jet with a packet of peanuts in his hand, I was under the impression that Mango was marketing to a new market, I hope thats the truth and not another lie from management

The important thing to remember here is that the market has become very segmented- the growth in the low-cost segment is spurred on by new entrants to the market as well as the lower end of the "traditional" market sliding down to the low cost segment. The growth in the “traditional’ market segment is a lot slower than that of the low cost segment. Therefore SAA will have to compete with its own airline to keep up with the other loco’s for market share. This simply does not make long term sense to offer super cheap fares with the cost base we have. Furthermore the “bucket and spade brigade” also clog up your customer service mechanism making it more difficult for the premium customer to get the type of service they are paying for. Right now, SAA is very strong in the premium segment domestically- it makes sense to go and exploit that and let the likes of Mango slug it out with the other loco’s at the budget end. Right now SAA could reduce its capacity by 30% and still not loose one premium customer (or connecting international passenger for that matter either) however the cost saving would be enormous- the additional benefit would be that Mango will be able to take advantage of both new entrant growth as well as the sliders form the traditional segment to the low cost segment.

Therefore SAA will always have a domestic operation; Mango is not in a position to be an interline carrier and quite frankly does not need to be, neither does it have aspirations to move out of its segment. The key question here is how big must SAA’s domestic operation be.

As far as this being another lie from management? Maybe you should go and have a chat with the SAAPA before making a comment like that- all this was agreed to, they were well aware that SAA aircraft were to be used.

fluffyfan

21st Jun 2007, 09:42

I know this is not about SAX and I apologise for the hijack of the thread.

DJ what you say makes sense, and I believe its a good thing that Mango is giving the LC guys a run for there money, I believe SAA wants to expand into Africa and possibily some more International routes (once the whole restructure is complete) so Mango and SAA are not conflicting with eachother, if the Consultants say thats the way to go then so be it, I dont think there is much tolerance left for a SAA that is losing money and being subsidised by the tax payer.

As for SAAPA, yes its my opinion they have done some very dodgy deals, most notably the over 60's agreement which was sold to the pilot group on certain conditions, of which not one is being complied with. On that topic JetNut just a question when the whole Over 60's deal came up for a vote, did you vote? (both times) because 1/3 of the pilot group did not vote, most notably the most junior group.

Deskjocky

21st Jun 2007, 10:40

Lets just say that a significant % discount on Lease Rates makes R8 mill per C-Check insignificant, does it not...? Especially considering that SAX does C-Checks on a monthly basis, so surely they know the costs involved.

SAX has been operating the CRJ's for a long time and have by now seen all they are going to see about the type- this accusation probably has its roots right back when SAX originally got the type and the engines were not getting through to TBO. I hardly think this is an issue anymore.:cool:

Q4NVS

21st Jun 2007, 12:51

Discussion closed / because I can? Very arrogant attitude.

Apart from calling people names, I guess when it is my post, I can decide what I put in it and when to stop contributing...:ooh:

I would hate to be a F/O on your flight deck.

Yes, cause it would be impossible (4 now). :}

JetNut

21st Jun 2007, 21:55

Fluffy...

yes, I did vote, both times.

And like the Zimbabwean's who voted in their elections, I too waited for for a true reflection of the population....

Also, I apologise for digressing off the topic, but... the seniority system at SAA is a major contributor to this airline's gradual demise. The old-timers who've had it sweet in the old SA...now have it even sweeter in the new SA....

Goldfish Jack

22nd Jun 2007, 04:59

Is this thread about SAX or the orange tails?

As to SAX, I know Comair were very interested in SAX a year or two ago - i think they even put in an offer for it - I wonder if they still are?

nugpot

22nd Jun 2007, 06:49

What happened just over a year ago, was that Transnet said that they wanted to get rid of SAA and SAX. They then alluded to SAX maybe being sold.

Comair, already thinking of feeder operations expressed interest and asked to see SAX's books. Transnet, not quite sure of what Government wanted to do with SAX, said that they could not open up SAX's operation for inspection and that was the end of that.

Comair's boss, being a bit of a media junkie, jumped the gun and told his media contacts that he was considering buying SAX, but nothing ever happened.

Avi8tor

22nd Jun 2007, 07:17

Does this journo know the details of Lease Agreements for the 4 additional CRJ's? If he did, he would not boast about things he "stumbled" upon...
Lets just say that a significant % discount on Lease Rates makes R8 mill per C-Check insignificant, does it not...? Especially considering that SAX does C-Checks
Those particular CRJ's came with NO maintaince reseserve AT ALL. RF looked at those aircraft. Came from a bankrupt airline in canada if my memory serves.

Your ignorance is showing. Sax has never received capitalisation from the government. Every cent was borrowed and they are well on the way of paying that off.

Only the last lot, the 'overdraft' was converted to loans. And thats not at a market interest rates. The R600 or R700 mil in the past has been recapitalisation.

Most of SAX's aircraft are leased, which means that the cost of aircraft is actually reflected in the operating budget. That means operating profit is a lot better than you make it sound.

Thats the whole point!!! Operating profit is BEFORE leasing costs!!!

Guys, dont wanna burst ur bubble, but what they are doing is creative accounting. Paying themselves massive bonuses for the 'profits'. Then when the 'everything' hits the fan, they get a severance package. Its a great scheme. Been doing it at SAA for yrs.

Do you really think there gonna tell you its going broke?

nugpot

22nd Jun 2007, 09:20

Avi8Tor, all I can say is that you are wrong. I see the financials - budget and results. I know what is in them and what not.

Can you say the same?

Deskjocky

22nd Jun 2007, 09:46

Nugs,

Im afriad you are wasting your time, some folk here including ol avi are hell bent on their view of the world- the facts just get in the way of a good argument.

Avi8tor

22nd Jun 2007, 12:54

The nice thing is the 'FACTS' seem to be rather plainly laid out in the article in the Business Day.

Auditors APF Chartered Accountants say this “material uncertainty” casts “significant doubt on its ability to continue as a going concern”.

Now guys, I am sorry, thats NOT my opinion, but that of an audit firm.

I am sure had they NOT been correct. Somebody would have said so.

I am the last one to let facts get in the way of a good argument. But guys, yet again, if you dont like the 'FACTS" I present to u guys, dont shoot the messenger. These are out of a reputiable business news paper and from very crediable sources in the industry. Dont play the man, play the ball.

Nugs,

Im afriad you are wasting your time, some folk here including ol avi are hell bent on their view of the world

Sorry, my 'view of the world' is that the state run airlines are making a piss poor job of it. DJ or any of the the others have yet to put anything on the table to prove otherwise.

Solution - Get the state out of airlines. Hence where the thread started.

Avi8Tor, all I can say is that you are wrong. I see the financials - budget and results.

I can show you snippets out of financial statements to make SAA look like a gold mine. Some of the BEST frauds have been committed this way. Only the final AUDITED balance sheet will show the truth.

The nice thing about this is that it wont be long before Transnet's annual results will be out.

Then the matter will be laid to rest.

JetNut

23rd Jun 2007, 12:05

AV8r....

Absolutely agree with you. When ministers appoint the board of an airline or any other business for that matter we all know whats going to happen.

These morons don't care about aviation. They didn't grow up dreaming of flying. So what happens....they milk it for as long as they can and then get out, and move into another industry, leaving us to pick up the pieces.

Guys like DJ run the business skewed by blatant arrogance, thereby leaving no room to make decisions based on proper research. State-owned airlines throughout the world have fallen in the same trap, politicians should leave the running of a complex business to people with the know-how.

But....although its frustrating, I know that in 10 years from now I'll be flying 787's for SAA, dealing with a brand new gang of idiots on the sixth floor. :ugh:

nugpot

23rd Jun 2007, 12:42

suitcaseman, please show me how this can be a fact. SAX was never for sale. Maria Ramos said in a Transnet briefing that SAX might be sold.

I guess it is the same kind of fact that all captains are arrogant and selfish.......

nugpot

23rd Jun 2007, 15:31

even gave conditions of the sale which had been negociated by the union

You see suitcaseman, this is why I differ of opinion from you. I have been involved on the Association side for 6 years and was present at various meetings during which the future of SAX was discussed. At every single meeting, the path was to DPE, as the draft bill you posted proves.

Having been there, I can only say that you are misinformed. SAX never was for sale.

Q4NVS

23rd Jun 2007, 19:26

Sorry, my 'view of the world' is that the state run airlines are making a piss poor job of it. DJ or any of the the others have yet to put anything on the table to prove otherwise.
Solution - Get the state out of airlines. Hence where the thread started.
There is forever continuous harping about Government owned/run Airlines and how "wrong" it is. Ever considered the fact that Emirates is wholly owned by the Gorvernment of Dubai...And that they had an accumulated long term debt of 1 898 Million US$ on 31 March 2004. They don't seem to be doing too badly at the moment, do they?

Avi8tor,
Just a question wrt your statement making a piss poor job of it. Is it not true that you were called for a SAX Interview just before you left Airlink (and SA) for Dubai?

If things are so "piss poor", how and why did your CV get to the SAX Recruitment desk?
Maria was stating "as a fact" that SAX would be sold off by the end of the year.
It was said that similar to SAA, SAX would be removed from Transnet. It's the "reputable" journo's that ran the "SAX For Sale" story.
:zzz:

Avi8tor

23rd Jun 2007, 23:52

Is it not true that you were called for a SAX Interview just before you left Airlink (and SA) for Dubai?

I can state for the record, I have never at ANY point put in a CV, discussed with any member of SAX management or been called for an interview at SAX.

Looks like the FACTS are getting in the way of a good rumor.

I dont understand why the SAA/SAX crew on this forum are not joining me in calling for government to get out of running their respective airlines?

nugpot

24th Jun 2007, 16:28

I dont understand why the SAA/SAX crew on this forum are not joining me in calling for government to get out of running their respective airlines?

I like getting my tax money back in bonuses........;)

I don't understand what any of this has to do with someone who fled to Dubai.

Avi8tor

24th Jun 2007, 19:29

Cause unlike some people, I have the greater interest of the industry at heart. Might not be there, but still would like to see EVERYBODY doing well.

Also not sure my selfish, money grabbing ways has anything to do with SAX financial pickle?

Deskjocky

25th Jun 2007, 08:43

Guys like DJ run the business skewed by blatant arrogance, thereby leaving no room to make decisions based on proper research. State-owned airlines throughout the world have fallen in the same trap, politicians should leave the running of a complex business to people with the know-how.

But....although its frustrating, I know that in 10 years from now I'll be flying 787's for SAA, dealing with a brand new gang of idiots on the sixth floor.

Since we seem to be getting personal, I would venture to say that you are talking out your butt. No critical decision is put before EXCO without a proper business case, founded very much on research, market indicators etc. The trouble comes when they take 6 months to make a decision. As well as when the big wigs make shoot from the hip decisions that always come back to bite.

I find it most interesting you feel you will be flying 787's in ten years, most interesting indeed. Yes, perhaps you will be flying them but not for SAA! Ignorance is bliss I suppose, but if it works for you...

JetNut

25th Jun 2007, 10:21

Hello DeskJerk,

You've managed to contradict yourself in the space of one posting. You claim that decisions are made at SAA based on business research, and then say that it takes six months to implement, and some big idiots shoot from the hip.

All this is saying to me (and the rest of SA) is that no proper research is ever done, and all decisions are taken ad hoc in crisis management. Otherwise, if proper research was actually done (and SAA management actually earned their salaries, like the pilots), then one would know exactly when time was of the essence in decision-making.

The airline industry is an extremely dynamic cut-throat environment, with no room for under-achievers. Fools running airline's will find themselves in a perpetual state of catch-up (if not out-of-work).

The South African economy is booming like it never has before. All major companies are capitalising on this. A simple example is SAB, today the second largest beer consortium in the world, with a huge stake in the Chinese market (a tough foreign market to penetrate). Yet, SAA is lagging so far behind that it's actually an embarrassment.

Why would an airline ever lease aircraft (on a time-scale contract with hundreds of clauses)????

Ask the question, what is the core function of this business? Answer: It is passenger/cargo transportation, with aircraft being your core asset. Why would any business rely on another totally seperate entity for the supply of a core asset, the risks are far too high (and we are seeing some of the problems now), if that supplier goes bust, there's no other to replace it in a short space of time. Only a complete business moron would engage in contracts like that. One doesn't see ESKOM leasing a nuclear power-plant....

Its so fliipin' frustrating to watch.

DJ, how do you (and your cronies) justify your salaries, when you're obviously not competent enough to run this complex organisation (as the financial results have shown)....maybe you should become a journalist, as you seem to enjoy writing (crap).

I'm glad you seem to have no hope for this company, which only strengthens my previous statement...you okes are clueless.

Deskjocky

25th Jun 2007, 10:56

Tisk Tisk, Jetbut, the only moron here is you, in fact Im pretty sure the only way you managed to sneak in at SAA was because your daddy organised it.

The only thing your post tells the rest of SA is that there are some (thank goodness not all) real pricks flying for SAA! Something that has come up for debate here on pprune a number of times.

Interesting you took my post to mean I have no hope in the future of SAA, actually my insinuation was more clearly directed at you, but then I suppose it was too subtle for a University graduate such as yourself, moron.

Solid Rust Twotter

25th Jun 2007, 11:38

Simmer down gents. It's bad enough you have the clowns in charge trying to run the company into the ground while dipping into the taxpayer's pocket, but to tear it apart from inside is not going to help matters.

Maybe you should meet in the carpark with a sixpack each and settle this like men - a down-down competition....:ok:

Avi8tor

25th Jun 2007, 18:44

That looked like handbags at 30 paces stuff, very back in the 3rd grade.

The idea of this forum is that people express opinions on facts as they see them. Other people of similar interest, debate the issues with differing opinions and introduce new facts and ideas.

Just because somebody has a different opinion to you doesnt warrent name calling or getting personal.

The fact that SAA is under performing the rest of the SA economy and world wide industry trends in undisputable.

But nobody is suggesting that anybody who posts here is single handedly responsible.

Leave the name calling to the 7 year olds.