South Africa’s Comair is in “a very difficult financial position” due to coronavirus-related travel restrictions and does not anticipate being able to resume flights until October or November, the carrier has disclosed.
In a 30 April cautionary announcement to shareholders, Comair writes: “Although the company was experiencing financial headwinds prior to the Covid-19 outbreak, the five-week lockdown has caused the situation to rapidly deteriorate to a point where the company finds itself in a very difficult financial position.”
It advises shareholders to “exercise caution when dealing in the company’s securities until a further announcement is made”.
Comair says it has been “unable to operate” since 17 March and none of its business divisions have generated any revenues. Citing the South African government’s plan to gradually ease lockdown restrictions, Comair says it does not expect to begin operating before October or November.
The airline – which operates flights as a British Airways franchise carrier and under the Kulula low-cost brand – has taken a number of actions aimed at mitigating the impact of the lockdown on its finances. These include initiating plans to reduce the number of executives and other staff, terminating its planned acquisition of aircraft leasing specialist Star Air Cargo, and beginning negotiations with banks over a possible convertible loan note issuance.
Comair incurred an operating loss of R562 million ($31 million) in the second half of 2019, which it attributed mainly to South African Airways’ having gone into business rescue, saying the flag carrier owed it R790 million. Operating expenses in the six months ended 31 December increased 13% to R3.6 billion as a result of “significantly higher fleet and maintenance costs” and the Boeing 737 Max grounding.
Comair Warns on Finances With South African Flights Months Away
Also, Comair Ltd. warned investors that the grounding of South African air travel has put its finances in a precarious position, with the carrier preparing for at least five more months before it can resume flights.
The owner of budget airline Kulula and the operator of local flights for British Airways had slumped to an operating loss of 562 million rand ($31 million) in the six months through December – before the global coronavirus pandemic forced the grounding of almost all aircraft worldwide. South Africa imposed a strict lockdown in March and, while the government is slowly easing restrictions, a resumption of flights is unlikely before October, Comair said.
“The five-week lockdown has caused the situation to rapidly deteriorate to a point where the company finds itself in a very difficult financial position and shareholders are advised to exercise caution,” the Johannesburg-based carrier said in a statement on Thursday.
The stock slumped as much as 21%, and has lost more than 60% of its value in the year to date. Comair’s crisis is being felt across South Africa’s aviation industry. FlySafair, which had been adding routes and frequencies before the Covid-19 outbreak, is pushing the government to waive fees during the shutdown to help preserve cash. State-owned South African Airways is in administration and SA Express is in provisional liquidation.
Globally, aviation giants including Air France-KLM and Deutsche Lufthansa AG are locked in negotiations with their governments about bailout deals. The International Air Transport Association is estimating $314 billion in lost ticket sales this year and 25 million job losses.
Comair is working to reduce costs and strengthen the balance sheet to ensure survival, including through job cuts and asset sales. The company is in talks with lenders about providing bridge financing, though negotiations are ongoing.
Source: bloombergquint.com and flightglobal.com
