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1time files for liquidation

CEO issues letter; Mango denies claims it helped “squeeze” 1time out.

JOHANNESBURG – 1time (JSE:1TM) CEO Blackie Komani said on Friday that the airline filed for liquidation, after deciding business rescue was not viable. Flights were reportedly grounded at 3pm on Friday, leaving passengers stranded.

The airline is the tenth out of the 11 independent, private airlines launched in South Africa since deregulation in 1991, that have now failed, leaving only kulula.com and British Airways (both operated by Comair) remaining, said Comair (JSE:COM) and Kulula CEO Erik Venter.

The share price went into free-fall, dropping 70% to trade at 3c. A Sens statement was only issued at 5:18pm stating: “trading has been halted on the 1time share and the company will make application for suspension thereof”.

The JSE claims it acted to ensure a Sens was issued: “At 15:40 on Friday, on hearing rumours that 1time had applied for liquidation, the JSE immediately contacted 1time and its advisers to confirm that this was indeed the case. The exchange managed to obtain confirmation of this from the company at 16:10, whereupon trade in the company’s share was immediately halted.

“The JSE will now begin an investigation to determine whether or not its Listings Requirements were contravened. (In terms of JSE Listings Requirements, a listed company is required to announce any price sensitive information over the exchange’s Stock Exchange News Service, Sens, before anywhere else)”. 

Prior to the Sens statement a letter from Komani appeared on 1times site saying:

1time Airline has applied for business liquidation (02.11.2012) and that all of its operations have been grounded with immediate effect.

The business rescue practitioner has advised that there are no reasonable prospects of survival as a potential financier notified us this afternoon that they are no longer able to invest in our airline. It is therefore with the utmost regret, disappointment and heartfelt disbelief that we have to file for liquidation, which means the end of a dream and an era for all of us.

“I sincerely thank our employees who worked so hard over the years to drive 1time.s business, the travel trade who have been steadfast in their support, and our passengers who carried and maintained 1time during our most difficult and trying financial times, your loyalty is appreciated.

Although 1time ceases to exist, the airline that we.ve built up through blood, sweat, tears and undeniable passion, will live on in the hearts of our passengers and also our competitors, who know that they have lost a formidable and world-class player in the low cost market.”
Blacky Komani (1time Group CEO).

Stranded passengers

Mango Communications Manager Hein Kaiser told Moneyweb Mango will, along with other carriers in the market, make affordable capacity available to assist stranded passengers.

Venter said his airline was unlikely to pick up stranded passengers as its flights are full. He confirmed that in the last couple of minutes bookings with the low-cost airline, Kulula had picked up.

Acsa’s Chris Zweigenthal told ENCA that at least in the short-term ticket-holders would probably have to buy new tickets with other airlines. He added the airline had a genuine belief that it could survive and as such continued selling tickets.

Zweigenthal said small airlines are in crisis. “Airlines are just not able to generate sufficient revenues from passengers,” he said, adding that the domestic market is not seeing growth and at the moment. However, he believes that the industry is resilient and will recover.

Squeezed out?

Asked for his feelings on the liquidation, Venter said “it is not a surprise”. At this stage there was not a lot 1time could do to turnaround the airline. It was another casualty of SAA and Mango. In 2004 when 1time entered the market, he said, there was lots of competition, when Mango came in, in 2006, 1time was squeezed as it could not compete with a subsidised airline, it was unable to make profits to update its aircraft.

Forming acting CEO of SAA Chris Smyth said:

In response to the perception that Mango helped squeeze 1time out of the market, Kaiser told Moneyweb: “Mango is operationally independent and completely dependent on its own balance sheet for funding and growth. Mango is substantially cash positive. Mango was launched with a R100m shareholder’s loan which was repaid in full by the airline’s third fiscal. Since then, Mango has not received any subsidisation from any party.”

He added that there are several factors that impact an airline’s viability, including the use of fleet choice, which directly impacts operational cost in terms of maintenance, operational efficiency and fuel consumption. Further, “passenger numbers have steadily declined since 2008 and competition in the market has been fierce given the on-going economic challenges every business in South Africa, and indeed the world, faces.”

Mango CEO Nico Bezuidenhout said: “Today is a sad day for South African aviation. Mango regrets the cessation of operation of any role player in the South African aviation sector. While we may have been competitors, the liquidation of 1Time is not good news. Not only does it impact the families of employees but also thousands of people with confirmed travel across the country and the aviation sector as a whole.”

Asked what the impact would be on the market Venter said it would not really impact Kulula, but it could cause a shrinkage in the market of between 2-3%.

Failed business rescue

On August 21, 1time’s board of directors applied to place the company’s operating subsidiaries, 1time Airline and Jetworx Aircraft Services into business rescue, saying it was “financially distressed”.

“The business rescue process will allow 1time to continue to operate while it prepares and implements a plan of reorganisation – to focus on its more profitable routes and to reorganise the business financially and strategically so that it can operate efficiently and sustainably while aiming to return to profitability and to emerge as a healthier company,” the statement read.

At the time, the board believed there was a reasonable prospect of rescuing the subsidiaries. On the SAfm Market Update with Moneyweb later that day, Komani said that the business rescue was not initiated because of an imminent liquidation application by creditors but through the board’s own volition.

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