Page 52 - World Airnews Magazine April 2020 Edition

AIRLINES AIRLINES

COMAIR NAVIGATES Rescue on 5 December 2019. The Business
SAA was placed in voluntary Business
Rescue Practitioner is required to deter-

STRONG HEADWINDS mine whether or not there is a reasonable
prospect of a successful business rescue. If
not, SAA will be placed into liquidation.

The future recoverability of the amount
outstanding from SAA remains uncertain.
Comair recorded a loss allowance of R285
million in terms of IFRS 9 against the SAA
damages claim receivable as at 30 June 2019.
Following the SAA Business Rescue
Process, the board of directors of Comair
has decided to increase the IFRS 9 loss
allowance as at 31 December 2019 by R505
million to the full value of the outstanding
settlement amount of R790 million. Wrenelle Stander

TRANSITION OF THE FLEET FROM aircraft to extract historical maintenance No re-certification date has been forthcom-

SOUTH AFRICAN AIRWAYS TECHNICAL records. This is timed to coincide with ing from Boeing, but Comair continues to incur

(SAAT) TO LUFTHANSA TECHNIK a major maintenance event, minimising cumulative losses and disruption to fleet avail-

MAINTENANCE INTERNATIONAL disruption to the flight schedule. ability. The grounding hampers the Group’s

(LTMI) The complete fleet transition is due by the ability to forecast future fleet requirements.

The transition from South African Airways second half of the 2020 calendar year. LTMI Comair has also contributed (US) $45

Technical to Lufthansa Technik Maintenance recovers initial set-up costs and scales up million (US) $26 million in cash and (US) $19

International for the fleet’s line maintenance its facilities to coincide with the transition, million funded) in pre-delivery deposits
has been accelerated as far as is feasible, so Comair will not see any meaningful cost towards the 737 MAX 8 order. The ongoing

while maintaining the flight schedule and benefits until the financial year of 2022. uncertainty surrounding re-certification
on-time-performance targets. GROUNDING OF THE 737 MAX 8 as well as the prescribed return-to-service

to R3.6 billion as a result of the following: aircraft lease payments of R101 million, Seven of the 26-strong fleet are already processes of the 737 MAX 8 has led Comair

• Aircraft maintenance costs increased now disclosed as “financing activities” being maintained by LTMI, with significant Operations of the Boeing 737 MAX 8 to accelerate compensation negotiations and

omair Limited have reported a by R215 million arising from the in the Statement of Cash Flows, for improvement in aircraft availability. aircraft were suspended on 13 March 2019 explore the legal and financial consequences

by the US Federal Aviation Administration.

Cheadline loss of R564 million in its replacement of five owned Boeing IFRS 16 purposes. The transition requires grounding the thereof. Q

interim results for the six months ending on 737-400 aircraft with five leased 737- • An amount of R265 million which pertains

31 December 2019 - R450 million of which is 800 aircraft, as well as additional line to aircraft pre-delivery debt is classified

attributable to the increase in the IFRS 9 loss maintenance costs arising from the in current liabilities but will be refinanced

allowance on the SAA damages claim. transition of the fleet from the transi- into long-term debt on delivery of the

tion of the fleet from SAAT to LTMI.

Comair is the only JSE-listed airline oper- next two 737 MAX 8 aircraft (subject to
ator, with two airline brands namely kulula. • Hard currency costs contributed to an regulatory approval by the SACAA).

com, and British Airways, which it operates increase of R51 million into operating DIVIDENDS

under licence in Southern Africa. expenses and inflationary escalations
added a further R70 million.
Comair Group CEO Wrenelle Stander said, In view of the Group’s current financial
“Comair Limited is facing strong headwinds • Short-term wet-lease costs increased status, the Board has determined that no

as a result of its fleet renewal programme, by R16 million to R48 million. These dividend should be declared for the 2020

the transition of its fleet from South African cost escalations were off set by a R40 financial year. It is also envisaged that

Airways Technical to Lufthansa Technik million fuel cost saving despite having no dividends will be declared until such

maintenance international, the impairment increased flown sectors by 4%. The time as the fleet has transitioned from

of the SAA claim as well as the extended savings were largely due to the de- SAAT to LTMI, the matter of the 737 MAX

grounding of the 737 MAX 8. crease in the dollar price of oil from an 8 has been resolved and targeted aircraft
utilisation has been achieved.
average of (US) $72/barrel to (US) $62/

“We have taken decisive steps to imple-

ment far reaching cost-cutting measures and barrel despite the average Rand/Dollar SAA DAMAGES CLAIM

exchange rate weakening from an aver-
to increase revenue through improved fleet age of R14.20 to R14.70/dollar. On 15 February 2019 the Company entered
availability and aircraft utilisation. In addi- into a full and final settlement agreement

tion, negotiations with Boeing are underway • An incremental increase of R101 mil- with South African Airways which was

to mitigate the impact of the grounding of lion in lease costs relating to five new made an order of court.
the Boeing 737 MAX 8 and to pursue the full long-term leases.

In terms of the settlement agreement,

outstanding settlement amount owed by SAA, • Comair continues to incur substantial losses, SAA would pay Comair a settlement

notwithstanding the provision made by Comair as a result of the grounding of the Boeing

for the full amount. We are also divesting from 737 MAX 8, without generating the com- amount of R1 108 040 000 plus interest

non-performing investments. A new board is in mensurate revenue or contribution. made in accordance with a payment sched-

place which fully understands the challenges and • Depreciation and amortisation of ule commencing 28 February 2019 and

opportunities the business is facing. The board property, plant and equipment and in- terminating on 28 July 2022. SAA failed to
make the payment of the capital and inter-
will support the executive management team, to tangible assets increased by R55 million

successfully navigate the challenges and leverage mainly from a change to the expected est amount due on 28 December 2019.

the opportunities that lie ahead. It is a great time remaining useful life of engines follow- Consequently, SAA is in breach of its obliga-

to reposition the business,” she said. ing major maintenance events. tions in terms of the Settlement Agreement

• Cash generated from operations in- and the full outstanding amount of R790
EARNINGS REVIEW creased by R175 million, however, this million, as of 31 December 2019, became due

Operating expenses have increased by 13% is off set by the incremental increase in in terms of the Settlement Agreement.

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