SAA CONCLUDING SWAP TRANSACTION WITH AIRBUS AS DIRECTED BY FINANCE MINISTER

21 December 2015

The Minister of Finance, Mr Pravin Gordhan, directed the Board of South African Airways (SAA) to conclude the swap transaction with Airbus in line with approval granted in July 2015. SAA has informed the National Treasury that the Board has approved the execution of the transaction as directed and a process is underway to conclude it within the next few days.

The transaction Wil see SAA swap the purchase of ten A320 aircraft for a lease of five "30-300 aircraft from Airbus.

The National Treasury has also been in direct contact with Airbus to ensure that all the required actions are executed smoothly to conclude the deal. Airbus has indicated that they are amenable to the implementation of the transaction and have required that all legal documentation be in place by 28 December 2015. The National Treasury will work closely with Airbus and SAA to finalise the swap transaction.

The implementation of the deal in this manner will mean that SAA will no longer be required to pay additional pre-delivery payments (pops) to Airbus, Which would have amounted to approximately USD 40 million. Also, as the takes delivery Of each Of the A330s, the PDPs that have already been paid, which total just more than USD 100 million, will be refunded by Airbus.

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 totalled in excess of R1 billion.

The implementation of the transaction therefore improve the airline's financial position by alleviating the cash flow pressure and improving its profitability. Further measures will be taken next year to stabilise the airline.

Statement issued by National Treasury, 21 December 2015