Comair warns of a steep dive in its profits
Comair, operator of British Airways in South Africa and low-cost airline kulula.com, said that it expected its earnings a share and headline earnings a share to plummet far below the 192.4cents and 197.2c respectively recorded during the corresponding period last year.
The beleaguered company reported a R564million loss for the first half of 2020 following an unprecedented situation due to the coronavirus lockdowns that saw the global aviation industry facing a near collapse.
Yesterday, the group’s business rescue practitioners (BRPs) said Comair needed a substantial cash injection to fly again.
They also confirmed that they were in discussions with funders to recapitalise the airline in order to resume domestic passenger operations by November 1.
“Over 30 potential funders had been contacted and six are progressing discussions,” said the BRPs, adding that Comair acquired Infinea’s 50percent shareholding of Nacelle to keep afloat.
Shaun Collyer, one of the BRPs, said that employees had been placed on unpaid leave and retrenchment proceedings were continuing under the guidance of the Commission for Conciliation, Mediation and Arbitration. “This unfortunate hardship has been imposed on Comair employees as a consequence of the Covid-19 lockdown and State of Disaster Act,” Collyer said.
In the past three months alone, Comair has wiped nearly R500m off its market cap.
Yesterday, the company’s share price fell nearly 5percent on the news, closing 4.726percent weaker at R1.
Independent aviation analyst Joachim Vermooten said yesterday that the government needed to bail out all airlines to ensure their survival during the national lockdown.
Vermooten added that governments across the globe were financing airlines to ensure their survival.
“The government has to provide financial assistance to all airlines as a result of the groundings being implemented by government orders.
"This has happened elsewhere in the world,” he said, referring to international airline groups including the Lufthansa Group, which had received a $10 billion (R171.62bn) bailout from the German stabilisation fund.
“Lufthansa, Delta Airlines and British Airlines have all received government funding.
"They were capitalised and were running profitably before Covid-19.
"They needed assistance to be able survive Covid-19 and to be ready for a new economy,” Vermooten said.
He added that the government needed to provide a timeline on when compensation to the airlines would be made.
Comair’s BRPs last month said that the company had not been able to operate any scheduled passenger flights since March 26, when the lockdown began and consequently they had not been able to earn revenue.
The BRPs added that when the government had announced that the lockdown would be lifted in phases, and domestic flights would only resume in level 2, Comair “had no choice” but to file for business rescue.
On Monday, the BRPs for SA Airways said in a draft business rescue plan that they needed nearly R5bn in further bailouts from the government to rehabilitate the struggling airline.
The BRPs said that they wanted the government to provide R4.6bn in a new draft business rescue plan for creditors, employees and the Department of Public Enterprises.
They said the cash injection beyond the R16.4bn already awarded would be used towards the paying lenders.
Vermooten said that business rescue was a temporary measure as Comair’s directors were uncertain about when their revenue would flow again.
“They are certain about the costs, and can reduce the costs a little.
"But they are uncertain about whether they will fly again, and what revenues will flow when they fly again.
"The only option for the directors is to comply with the lockdown regulations and go into business rescue,” said Vermooten.