South African private-sector airline group Comair issued a cautionary statement on the Johannesburg Stock Exchange’s Stock Exchange News Service (SENS) on April 30, warning about the impact on its business of the national lockdown and halt to all scheduled air services to, from and within South Africa. This lockdown was an attempt to counter the Covid-19 pandemic. Comair operated the British Airways (in South Africa) brand and the Kulula low cost carrier brand.

The South African government had established a five-level risk assessment response to Covid-19, with Level 5 being full lockdown, with Level 4, Level 3, and so on being progressive relaxations of the lockdown. Comair, in its SENS statement, welcomed the actions taken by the government. It highlighted the importance of the health and safety of its staff, their families and customers.

“For the period 17 March to 30 April 2020, in terms of the lockdown, Comair has been unable to operate,” it pointed out. “Comair has however been monitoring the information released by government closely. … [I]t 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. … In terms of government's [risk] requirements, it is not anticipated that Comair will commence operating prior to October or November 2020.”

Back in late February, Comair had announced (also through SENS) that it had suffered an operating loss of R562-million for the second half of last year. This had been the result of State-owned South African Airways going into business rescue, which meant that it could not pay Comair R790-million (in net terms, R505-million) that it was required to, and because of the global grounding of the Boeing 737 MAX airliner, of which Comair had eight on order (one of which had been delivered before the grounding), as well as significantly higher fleet and maintenance costs. 

“Throughout this challenging and uncertain time, management has been working tirelessly to secure and manage the business effectively by implementing a turnaround process focusing on cash preservation, cost cutting, disposal of non-performing assets and a strengthening of the balance sheet, working with external re-structuring advisors to reduce costs, preserve short-term liquidity as well as the restructuring of the balance sheet for long-term sustainability,” affirmed Comair. “However, since the imposition of the lockdown, there has been no revenue generated by any of the business divisions.”

To deal with the situation, the group had been implementing a number of measures. Thus, it was actively negotiating with Boeing to cancel its orders for the 737 MAX and for compensation for losses caused by the grounding of the aircraft. It was also implementing a two-phase retrenchment process, with the almost concluded Phase 1 focused on management, reducing the number of executives and saving R23-million, and the just started Phase 2, aimed at cutting total staff numbers. It had terminated the STAR Air Cargo acquisition, disposed of the Course restaurant, and closed the SLOW in the City lounge in Sandton, north of Johannesburg. Comair was also taking part in industry-wide lobbying of government for special support for the airline industry. And it had started talks with the banking sector, to obtain bridging finance; these discussions were continuing. 

“The possibility of raising additional equity capital via a convertible preferred share or convertible loan note issuance is being investigated,” it also reported. “Although the company was experiencing financial headwinds prior to the Covid-19 outbreak, the five week lockdown has caused the situation to rapidly deteriorate to a point where the company finds itself in a very difficult financial position and shareholders are advised to exercise caution when dealing in the Company’s securities until a further announcement is made.”