South African carrier Comair’s business rescue plan envisages a consortium of investors taking a 99% shareholding in the company, and restarting services around 1 December. Some 1,800 jobs will be retained – although 400 will be shed – and the airline will resume operations with a fleet of 25 aircraft. The consortium comprises seven named individuals plus an investment vehicle, Luthier Capital, putting up an initial interest-free loan of R100 million ($6 million), to be drawn down in two equal tranches on 21 September and 1 October. If certain conditions are met, these funds will be converted to securities and a further R400 million in equity will be injected, giving a total equity recapitalisation of R500 million. New net debt totalling R600 million will be sought. Comair has 20 aircraft but the optimised fleet, according to the business plan, would comprise 15 owned and 10 leased aircraft. Lease terms on four aircraft have been renegotiated and the intention is to do the same for the rest. Projections from the business plan estimate that Comair will become profitable in the year to 30 June 2022, with a pre-tax surplus of R497 million for the airline operation and R647 million for the group as a whole. The investors intend to acquire Comair by increasing the authorised capital by 50 billion shares, to a total of 51 billion. If the conditions for the investment plan are not met, the rescue practitioners will commence a structured wind-down of the company. Comair has been immersed in a business rescue effort since early May, the result of rising debt levels from a fleet renewal, exacerbated by the grounding of the Boeing 737 Max as well as the air transport crisis triggered by the pandemic. Its total debt increased from R2.2 billion in June 2015 to R4.9 billion by the end of last year, with a 10-fold rise in interest and financing costs. Fleet ownership costs have risen by 65% over the three years to June 2020. Over the same period revenues have increased by only 26% compared with 41% for overall expenses, and operating profit has fallen sharply. Comair had secured a settlement last year for a R1.1 billion payment from South African Airways, over a competition legal case, but SAA’s own subsequent entry into business rescue means recovery of the full amount is highly unlikely.

Source: Cirium

Passenger air traffic in the Latin America region remained hard-hit by coronavirus measures in July, with many countries still severely restricting flights as they handle the global pandemic. On routes to, from and within the Latin America and Caribbean region, demand measured in RPKs dropped 88% in July year-over-year, according to IATA. Capacity, as measured in ASKs, was down 83% in the same period. Load factors reached 63%. Figures were worse for airlines based specifically in the region, with July demand down 95% year-over-year and not changing much from the 97% decline in June. Capacity was down 93% in July, and load factors were 58%. Latin America also had the most significant declines in international demand and capacity compared with other regions, IATA says. International demand for Latin American carriers dropped 32% in July on a year-over-year basis, compared with 29% in June. Capacity was down 45%. “That market is still very much controlled,” Peter Cerdá, IATA’s regional vice president, the Americas, tells Cirium. “We’re six months into this crisis, [and] the vast majority of our countries still have either 100% country restrictions or closures, entry restrictions or quarantine. That has put a huge burden on the sector.” Several key markets continue to have closed or restricted borders, only allowing their own residents into their country. That is still the case in Colombia, Chile, Argentina and Panama. However, Cerdá notes that Panama is allowing carriers to transit through its Tocumen hub on the way to other countries. The region has seen some movement in recent weeks, with Colombia restarting domestic flights on 1 September. The Colombian government also recently committed $370 million in debtor-in-possession financing to Avianca, a move that the industry applauded but did garner criticism from some citizens, who argue that money should be spent elsewhere. IATA continues to push for countries in the region to offer airlines more financial support. “We are pushing for government aid as long as it is fair and available to all the parties,” Cerdá says. Meanwhile, aviation on a global basis is doing better. Global RPKs were down 80% in July year-over-year. In June, that number was 87%.

Source: Cirium

The boss of London Heathrow airport is urging the UK and USA to co-operate on a pilot programme to test passengers flying between London and New York for Covid-19 before they board to avoid them having to quarantine on arrival. Such a scheme, using the latest testing technology that can provide results within hours, would help kick-start one of the world’s busiest long-haul air routes and restore wider confidence in aviation, says John Holland-Kaye. Speaking on an Aviation Club UK webinar today, Holland-Kaye said a bilateral initiative could be “up and running within a week or two” if both governments agreed on common testing standards. “The UK is in a perfect position to lead this effort,” he says. Holland-Kaye suggests that with current coronavirus infection rates below 1% in most countries, the vast majority of would-be travelers are virus-free. Yet, worries about importing cases has led many nations, including the UK, to impose quarantine restrictions of up to 14 days on those arriving from much of the world, with lists of at-risk territories changing at short notice. “Few people will fly with this quarantine roulette,” he says. “We need a process that ensures that the 99% or more of people who do not have Covid can begin travelling again.” He says that, if successful, the scheme could be extended to other popular destinations in countries with which the UK has a strong partnership, including the United Arab Emirates and some European states. But he says that the impetus must come from industry itself. “The [UK] government does not have the bandwidth – it is worrying about schools, the health service, jobs, infection rates,” he says. “We have the opportunity to take the lead on this. If we can come to them with a solution, we have a better chance of making headway. If we just complain, we make their lives harder.” Holland-Kaye says the UK economy is being particularly crippled by the pandemic because of its dependence on global trade and services. “We were a powerhouse going into this crisis, punching well above our weight, and aviation was the lifeblood of the economy,” he says. “Heathrow was the best connected airport in the world, and global companies chose the UK because of its easy access.” The UK government’s failure to follow the example of the US and other major European countries to provide specific financial support for its airlines and airports will “put a limit on the recovery of the economy”, he says. “How does the UK plan to be global Britain coming out of this, if it is increasingly dependent on Air France and Lufthansa for global connectivity?”

Source: Cirium