Comair initiates Section 189 as part of financial recovery plan

Comair today (SUBS: Monday 23 March) announced a restructuring to improve its efficiency and financial sustainability following its H1 2020 interim results, recent difficult economic conditions and the unprecedented crisis facing the global airline industry.

Wrenelle Stander, Comair CEO said: “Our results for the first half of the 2020 financial year showed that although our revenue grew at 3% during the six months, we could not sustain the additional costs of 14% resulting from some underperforming investments and significantly higher fleet and maintenance costs which severely impacted the company’s profitability.”

“While the decision to renew our fleet was the right one at the time, the pace of renewal in an underperforming economy placed a burden on operating costs and profitability. In 2019 alone we took delivery of five additional Boeing 737-800 leases, as well as a new Boeing 737 MAX 8 aircraft.”

The transfer from SAA Technical (SAAT) to Lufthansa Technik Maintenance International (LTMI), while progressing according to plan, means that the airline will be paying for two maintenance providers until at least end June 2021.

Finally, the grounding of the Boeing MAX 8 has had multiple negative financial impacts:

  • Continued use of wet leases to replace three MAX 8 aircraft which would now be in the schedule;
  • Cash lock-up of US$45million in the MAX 8 pre-delivery payments, as well as interest payments on the debt portion of the pre-delivery payments; and
  • Interest payments on the first MAX 8.

“Despite our efforts over the last few months to preserve cash, maintain liquidity; divestment from non-performing acquisitions; aggressive cost reduction across the Group; taking back control of the fleet; and unlocking further operational efficiencies, more remains to be done,” said Stander.

“Today we initiated a Section 189 process in terms of the Labour Relations Act, to protect jobs and to ensure the sustainability of the Comair business.”

She added Comair had been acknowledged as one of South Africa’s Top Employers and remained proud of that, “and we have always known that our personnel are our greatest asset. Consequently, reducing our staff complement is a decision taken with great regret.”

We continue to pursue cost reduction measures across the Group to mitigate the impact on our staff.

The financial situation has been aggravated by the impact of Covid-19. The airline has been cancelling and combining flights in response to lower demand. We will continue to adjust our operation to the rapidly evolving situation.

For the foreseeable future the primary focus will be on restructuring the balance sheet as well as cash preservation.

A focussed, Executive team continues to focus on the long-term sustainability of the organisation.