After suffering operational disruptions from the suspension of Boeing 737 Max deliveries and the type’s grounding, South African airline Comair is reassessing its commitment to the new family and is looking to fast-track discussions with Boeing over compensation. Johannesburg-based Comair, which flies franchise services for British Airways, operates 14 737-800s alongside six 737 Classics, according to Cirium fleets data. It had taken its first of eight 737 Max 8 aircraft (below) just prior to the Ethiopian Max 8 crash on 9 March 2019. That crash resulted in the global fleet being grounded and Boeing suspending deliveries indefinitely. “Following the delivery of the first Max in February 2019, the fleet renewal process, which was underway, hit some major [hold-ups],” says Wrenelle Stander, chief executive of Comair. The CEO addressed the UK Aviation Club in London via a video link from Johannesburg instead of a personal visit due to South African coronavirus travel restrictions. Stander outlined the impact of the grounding on the airline’s fleet planned roll-over. “Since [the grounding] we’ve taken delivery of five -800s which is part of the fleet renewal progress. But we’ve only taken one of the eight Max aircraft on order,” she says. “We as an organisation continue to incur cumulative costs and disruption to fleet availability. The grounding also hampers the group’s ability to forecast fleet requirements, because we really don’t know when the Max will be in operation again.” With a year passed since the grounding and no clarity as to when it will end, Comair is upping the tempo in its talks with Boeing. “Comair has contributed $45 million in pre-delivery deposits towards the Max order. And this is, of course, cash which is locked up,” says Stander. “The ongoing uncertainty has prompted Comair now to accelerate compensation negotiations and to explore the legal and financial consequences of where we find ourselves today.” Stander says that the grounding has put much of its fleet-renewal programme into limbo and prompted a reassessment of its original decision to order the Max. “We should have had three Max aircraft delivered by now. Given the grounding, we’ve had to take more expensive short-term options, doubling the costs in quite a number of areas,” she says. The airline has extended the lives of three 737-400s to allow them to remain in service until the end of 2020. But, any further extensions will require investment in heavy maintenance and will not be implemented without an additional cost-benefit analysis. “The Max decision was made in 2012…and there’s a lot of discussion within the organisation about whether that was the right decision,” says Stander. A switch in strategy to take more 737-800s instead of the Max order “is definitely something we’re considering at the moment”. However, Comair is committed to remaining a 737 operator: “We would not contemplate Airbuses or a mixed fleet at this point because we want to standardise and simplify operations,” Stander says.

Source: Cirium

United Airlines is preparing for a dark scenario for the aviation industry in the coming months as the coronavirus decimates demand and customers stay away from travel in order to protect themselves from becoming infected with the fast-moving flu-like disease. United’s president Scott Kirby told investors at the JP Morgan Aviation, Transportation and Industrials Conference on 10 March that the airline is already seeing declines in gross bookings of up to 70% in some geographies, and is preparing for a stark drop-off in revenue for the rest of the year “This is a crisis that is going to have a large near term impact on revenue. We are planning for it to be deep,” he says. While January and February were the number one and two winter operations months in the history of the Chicago-based carrier, respectively, United said that demand dropped sharply in the first few weeks of the crisis, from about mid-February. The airline reduced its domestic capacity by 10% and its international capacity by 20% on 4 March. Many conferences, conventions and business meetings across the US and around the world have been cancelled, thus driving the corporate demand lower. ”Leisure travel is just a couple of weeks behind on the booking curve,” Kirby says. Kirby now says United will eliminate 20% of domestic capacity in April and May each, and at least that amount in later months until the airline sees a concrete and significant pickup in demand. So far, gross bookings in Asia-Pacific are down about 70%, with gross bookings to Europe down about 50%, Kirby says. Revenues could fall as much as 70% in April and May, 60% in June and at least 40% in the months thereafter for the rest of the year. “This demand scenario is not a forecast but what we are planning for under a dire stress test scenario,” he says. “Demand was down 40% for two months after 9/11. This is worse than the post-9/11 decline in demand.” He adds that the airline is planning for a full recovery time of 18 months, and it will take two to four years for the company’s capital and operational expenditures budgets to return to normal levels. “We are 100% focused on making it through the near term crisis,” Kirby says. “We have to see demand recover, and then we are going to restore and go further on strengthening the balance sheet before we let capex go up again.” Asked whether or not the airline is considering furloughs of staff during the crisis to keep costs down, Kirby says that the company’s “first objective is to take the steps required for United to survive, and the second objective is to do so without furloughs.” If it becomes necessary to do furloughs to save the airline, “I’ll feel awful, but I won’t hesitate to do it.”
Regarding the ongoing discussion about a government bailout of the travel and aviation industry, Kirby says that for the moment, United will not count on government intervention. “I am encouraged for the US economy to hear that the conversation is starting because I do think this [will have a] short term impact for the economy and an appropriate place for government to be having those kinds of conversations.” Slot relief is another worry for airlines that are cutting routes during the crisis. Earlier on Tuesday, the European Commission said that it will “rapidly” legislate to suspend rules that force airlines to operate 80% of their scheduled flights in order to hold on airport slots. The use-it-or-lose-it rules have been heavily criticised by airlines, which argue that the lack of flexibility prevents them from responding to the demand reductions caused by the coronavirus. Some airlines have continued operating “ghost flights” just to maintain those slot assignment. “If you are worrying about climate change, good grief. How ridiculous is that,” Kirby says.

Source: Cirium

UK regulators are warning that European airlines might not be completely exempt from passenger compensation payments relating to the coronavirus outbreak, although much of the disruption is likely to fall under ‘extraordinary circumstance’ immunity. The Civil Aviation Authority has outlined its interpretation of European Union compensation rules in light of the outbreak. It says the EU passenger rights legislation is “applicable at all times” including the “unprecedented” coronavirus situation. But it acknowledges that – in the event of flight cancellations – airlines could face “significant practical difficulties” in providing alternative flights, and refunds could be the only realistic measure available. While fixed-sum compensation might ordinarily apply to flight cancellations, the CAA believes coronavirus containment measures – such as government advisories against travel, or regulatory activity which restricts airline operations – would be viewed as extraordinary circumstances, exempting carriers from such compensation obligations. Airlines might choose to cancel flights at short notice to avoid costly operation of services with only a small number of passengers on board. “Such [situations] may be viewed as ‘extraordinary circumstances’ under [the EU regulation] and therefore the fixed-sum compensation would not be payable,” the CAA states, but cautions: “This may not be the case in all circumstances.” Although the CAA says it is “cognisant” of the current difficult operating conditions for airlines, and believes it should act proportionately and concentrate on harmful “systematic” issues, it nevertheless expects carriers to act in the interests of their passengers. “On this basis, we will look to airlines to demonstrate that they are being pro-active and flexible in managing the situation and minimising the impact on passengers of the disruption,” it says. It adds that its interpretation of ‘extraordinary circumstances’ is only a guide and each individual case will have its own specific facts to consider. Passengers will be able to seek legal redress if they disagree with the regulator’s view.

Source: Cirium