Cape Town - South African Airways (SAA) had outsourced its infrastructure and support services to Lufthansagebaudemanagement SA (LGMSA), a company in which German airline Lufthansa had a substantial stake, well-placed sources at the companies said yesterday.
The 10-year agreement, to be announced today, guarantees cost savings and improved service levels and will cost SAA about R50 million a year. It is expected to shave about 15 percent from present costs.
The sources said SAA had taken a 10 percent stake in LGMSA. The sum had still to be finalised.
LGMSA is a joint venture between German parent company LGM Holdings, with 55 percent, SAA with 10 percent and DB Thermal, which has 35 percent. DB Thermal is a German company that has operated in South Africa for more than 25 years.
LGMSA has taken on all 300 SAA infrastructure and support service employees with all existing rights and obligations, including pension fund and medical aid benefits.
It tendered successfully for the contract against international competition. A spokesman said there were originally 18 applicants.
``Eventually it was whittled down to us and a multinational based in Germany,`` he said.
Under the agreement LGMSA has taken over the maintenance of SAA infrastructure throughout South Africa including hangars, offices, cargo areas and workshops. It will also maintain fire systems and manage floor space, energy consumption and SAA`s ground vehicle fleet.
Rory Hunkin, the managing director of the newly formed South African company, said it would implement a R10 million information technology system and a 24-hour call system.
Sources in the aviation industry said it was significant that SAA had strengthened its ties with Lufthansa. The German airline has remained a commercial partner of SAA despite the fact that its bitter rival, the SAir group, the holding company of Swissair, has become SAA`s strategic equity partner.
The agreement, under which the SAir group bought 20 percent of SAA for R1,4 million last year, has left the South African airline free to join any alliance of international airlines.
Lufthansa and the SAir group are expected to bid against each other for a stake in SAA Technical, a private company formed from SAA`s profitable engineering and maintenance operation. The SAir group did not, however, bid against LGM for the new outsourcing contract.