South African Airways (SAA) would expand and modernise its aircraft fleet over the next few years as it expanded its network and attempted to cap soaring fuel costs.CEO Khaya Ngqula said that though the restructuring plan launched last March was on track, soaring oil prices were a real challenge for the airline.

SAA management had budgeted for an average oil price of $84 a barrel with a profit margin of 7,5% in 2008-09, but with international oil prices shooting above $140, Ngqula said a profit margin of 3%-6% was more realistic.

A modern, more fuel-efficient fleet will help SAA trim its surging fuel costs and ease pressure on profit margins.

SAA planned to lease six additional aircraft in this financial year and open a supply

competition to Airbus and Boeing for the acquisition of new aircraft over the next 12 years.

The new aircraftwould also help SAA cope with the additional capacityit planned to ad to

existing routes and the introduction of several new routes this year. In October SAA will launch a new flight to Maun, Botswana, while adding extra capacity to 11 existing destinations, including Cape Town, Luanda, Dar es Salaam, Mumbai, Munich, Perth and Sao Paulo.

While the grounding of its six ageing, fuel-heavy Boeing 747-400s in November had saved the airline R600m in the past financial year, it also meant the rest of the fleet was operating at capacity and the airline is at a point where it needs additional aircraft if it hopes to take advantage of new network opportunities and maintain its market share.

SAA’s immediate priority was to secure three narrow-body and three wide-body aircraft on lease and is actively in the market. The airline has held preliminary talks with Airbus and Boeing regarding potential orders and will open a supply competition to both manufacturers later this year.