Comair, the owner of low-cost airline kulula.com and operator of British Airways local flights in South Africa, posted an ominous cautionary Sens announcement on Thursday noting that it may only start flying again as late as October or November due to Covid-19 lockdown restrictions.
The announcement saw Comair’s share price slide by almost 20% in early trade, however, it paired the slide to just over 10% by around 1pm.
“In terms of (the) government’s latest requirements for the gradual upliftment of the lockdown in terms of a five-level risk assessment process, it appears that restricted air travel will commence at Risk Level 3, full domestic air travel at Risk Level 2 and regional and International air travel at Risk Level 1,” the JSE-listed aviation group noted.
“The level of the prevailing Covid-19 risk will determine the progression from Risk Level 5 to Risk Level 1. In terms of the Government’s requirements, it is not anticipated that Comair will commence operating prior to October or November 2020,” it added.
Comair’s cautionary announcement comes as all local and international commercial flights into South Africa, have been grounded since March.
It follows government banning local and international travel into and within the country, as one of the main “state of disaster” measures aimed at curbing the spread of the Covid-19 coronavirus. Comair, Flysafair, SAA and other domestic and international airlines worldwide, are caught in the midst of the biggest aviation industry crisis in history, with lockdown and curbs to air travel globally.
Comair noted in its latest Sens that the entire world has been affected by the Covid-19 outbreak and lockdown measures imposed by national governments to combat this virus. The group said that it “welcomed the decisive action taken by government in curbing the impact of Covid-19” on all South Africans.
“Of primary importance is the health and wellbeing of our staff and their families as well as our customers. For the period 17 March to 30 April 2020, in terms of the lockdown, Comair has been unable to operate. Comair has however been monitoring the information released by government closely,” it added.
Comair conceded that while the group had experienced financial headwinds prior to the Covid-19 outbreak, the five-week lockdown has caused the situation to “rapidly deteriorate”. It said that it now “finds itself in a very difficult financial position” and advised shareholders to exercise caution when dealing in the group’s securities.
“Throughout this challenging and uncertain time, management has been working tirelessly to secure and manage the business effectively by implementing a turnaround process,” the group added.
It said the plan focuses on cash preservation, cost cutting, disposal of non-performing assets and a strengthening of the balance sheet. However, it also noted that since the imposition of the lockdown, there has been no revenue generated by any of its business divisions.
Comair noted that turnaround actions to date include:
- Finalisation of Phase 1 of the two-phase Section189A (retrenchment) process, resulting in a decrease of the number of executives, with a cost reduction of R23 million;
- Initiation of Phase 2 of the Section 189A process to reduce the number of staff overall;
- Mutual termination of the STAR Air Cargo transaction was cancelled;
- Disposal of the Course Restaurant;
- Closure of SLOW in the City;
- Active engagement of Boeing on the cancellation of the 737 MAX 8 orders and payment of compensation relating to the grounding of the 737 MAX 8;
- Participation in industry initiatives to lobby Government for special aid for the airline industry; and
- Negotiations have commenced with the banking industry for the purpose of securing bridging finance. These negotiations are ongoing. The possibility of raising additional equity capital via a convertible preferred share or convertible loan note issuance is being investigated.