skip to Main Content
AVIATION LEGISLATION AT YOUR FINGERTIPS   
aircraft flying above the clouds

DEFAULTING SAA AND MAX DELAY DRAG DOWN COMAIR RESULTS

On Thursday, Comair which operates British Airways and the Kulula low cost carrier in South Africa issued a further trading statement on the Johannesburg Stock Exchange news service.

Comair is currently finalising its results for the six months ended 31 December 2019 and in this regard, shareholders are advised that EPS and HEPS are expected to be more than 170% lower than that of the EPS and HEPS for the six months ended 31 December 2018 (comparative period), resulting in a loss and headline loss for the period.
Comair’s share price has plummeted over 50% since this time last year.

The decrease in earnings relative to the same period in 2018 is attributed to an increase in operational costs pertaining to aircraft lease and maintenance costs arising from the replacement of five owned Boeing B737-400 aircraft with five leased Boeing B737-800 aircraft. In addition, there has been an increase in aircraft line maintenance costs arising from the transition of the fleet from SAA Technical to Lufthansa Technik.

Furthermore, earnings continue to be negatively impacted by cumulative losses incurred as a result of the ongoing grounding of the Boeing 737 MAX. No accrual for compensation from Boeing has been raised to date however, negotiations are underway.

RECOVERABILITY IN RESPECT OF SAA DAMAGES CLAIM RECEIVABLE
Shareholders are referred to the announcement released on SENS on 15 February 2019 wherein the
Company advised Shareholders that it had entered into a full and final settlement agreement (Settlement Agreement) with SAA and which Settlement Agreement was made an order of Court by the Supreme Court of Appeal.
In terms of the Settlement Agreement, SAA would pay Comair a settlement amount of R1 108 040 000 plus interest (Settlement Amount). The Settlement Amount would be made in accordance with a payment schedule commencing 28 February 2019 and terminating on 28 July 2022.
SAA failed to make the payment of the capital and interest amount due on 28 December 2019.
Consequently, SAA is in breach of its obligations in terms of the Settlement Agreement, and the full
outstanding amount of R790 million, as at 31 December 2019, became due in terms of the Settlement Agreement.
Furthermore, SAA was placed into voluntary Business Rescue on 5 December 2019. The Business Rescue Practitioner is required to determine whether or not there is a reasonable prospect of a successful business rescue. If not, SAA will be placed into liquidation.

Consequently, the future recoverability of the outstanding amount is uncertain. A loss allowance of R285 million was provided for in terms of IFRS9 loss allowances against the SAA damages claim receivable as at 30 June 2019, prior to SAA going into Business Rescue. The IFRS9 loss allowance as at 31 December 2019 remains to be determined, with reference to the outcome of the Business Rescue proceedings in respect of SAA. Shareholders are advised to remain alert for further updates in this regard.

UPDATE ON SUSPENSION OF BOEING 737 MAX

Operations of the Boeing 737 MAX aircraft were suspended on 13 March 2019 by the US Federal Aviation Administration. As a result, one 737 MAX owned by Comair was grounded, the second 737 MAX, due for delivery in March 2019 was also delayed for this reason and a third delivery is expected to be delayed beyond its contracted delivery month of February 2020. Shareholders are advised that no revised delivery dates have been forthcoming from Boeing.

FLEET
Comair operates 26 Boeing 737 aircraft, across its two airline brands, British Airways and kulula.com.
The fleet comprises 23x next-generation Boeing 737-800s and 3x Boeing 737-400s. Comair owns 10x next-generation Boeing 737-800s, as well as the 3x Boeing 737-400s, while it leases the remaining 13x next-generation Boeing 737-800s.
Comair took delivery of its first 737 MAX 8 on 27 February 2019, currently not part of Comair’s operated schedule, due the global grounding of this aircraft type.

Photo credit: COMAIR

This Post Has 0 Comments

Leave a Reply

Your email address will not be published. Required fields are marked *

AVIATION LEGISLATION AT YOUR FINGERTIPS

AVIATION LEGISLATION AT YOUR FINGERTIPS

Back To Top
WP to LinkedIn Auto Publish Powered By : XYZScripts.com