Mexican flag carrier Aeromexico says it has no plans to file for bankruptcy, but that it is “evaluating alternatives to move towards a better financial position” after the global coronavirus pandemic decimated its liquidity. The public statement on 19 June comes in response to media reports earlier in the day that said the airline is mulling filing for Chapter 11 bankruptcy protection in order to restructure its debt after much of commercial passenger aviation was grounded in the past weeks. “The company hereby informs that it has not initiated, nor has it made the decision to initiate, a restructuring procedure under Chapter 11 of the United States Bankruptcy Code,” the company says. “We are currently identifying additional sources of financing to strengthen operating cash flows,” it says. ”We are also analyzing different alternatives to successfully achieve, in the short and medium term, an orderly restructuring of financial commitments, without affecting or disrupting operations.” Latin American carriers are struggling as the region’s governments have been much slower to respond with support for the air transport industry than in other parts of the world, such as North America and Europe. Billion-dollar aid packages in those regions have helped airlines stay afloat, at least temporarily, and reorganise their operations after passenger demand dropped off sharply when the coronavirus exploded into a global pandemic earlier this year. Chile’s LATAM and Colombia’s Avianca both filed for bankruptcy protection in May in order to shield their businesses from creditors. The airlines say they want to make sure they are able to restart operations smoothly when passenger demand returns and when travel restrictions are lifted. Commercial aviation trade organization IATA has repeatedly criticized Latin American governments’ sluggish response to their aviation industries, and has strongly urged them to intervene on behalf of the sector’s 7.2 million jobs across the region. In May, the body, which represents 290 airlines worldwide, said the goverments had provided less than 1% of the airlines’ 2019 operating revenue in financial aid, making it the least-supportive region in the world. But giving governmet assistance to private companies in countries whose populations are already suffering from economic hardship is a difficult political proposition for many Latin American nations, even though air travel has been able to bridge vast distances across the continent where ground-based transportation networks, infrastructures and systems are sometimes unreliable. Air traffic fell by about 96% in Latin America and the Caribbean as the coronavirus pandemic reached its peak in April, and has yet to make any significant steps toward recovery. While most countries begin to lift restrictions in the coming weeks, Colombia and Argentina expect to have lockdowns in place through the end of August.

Source: Cirium

South African Airways’ final business rescue plan considerably revises down the losses projected over the first three years for the restructured carrier. While a draft plan circulated at the beginning of June indicated losses close to R20 billion ($1.1 billion) for the period, the final plan estimates pre-tax losses of around R6.3 billion. It projects 2023-24 to be the first profitable year, with pre-tax earnings of R836 million. While the draft plan had indicated a fleet being gradually reduced from 40 aircraft, the final business plan appears to presume a fleet of 13 aircraft from the outset, rising to 26 aircraft during 2021-22. This results in a revenue estimate of R1.2 billion for the first year – to the end of March 2021 – increasing to R6.6 billion for 2021-22 and then doubling to a stable figure of about R12-14 billion in subsequent years. By this point the airline would be transporting some 2.8 million passengers per year, with load factors in the low-to-mid-60% range. The business rescue plan estimates that the airline will employ close to 2,900 personnel by 2023. But the whole plan depends on gaining support from creditors, who are set to vote after a crucial meeting to be convened on 25 June.

Source: Cirium

Provisional liquidators of South African regional carrier SA Express are attempting to find a buyer for the airline, claiming that they are engaging with six or seven parties which have expressed interest in the company. Their effort follows court approval on 15 June to extend their powers, in order to explore the possibility of attracting investment in the airline. Final liquidation orders for SA Express – which would have simply resulted in the dismantling of the company and disposal of its assets – have been postponed until 6 September, giving the provisional liquidators a three-month window to secure a deal. One of the liquidators, Aviwe Ntandazo Ndyamara, disclosed the situation as he belatedly testified to the parliamentary standing committee on public accounts on 17 June. The liquidators had previously been due to appear before the committee but failed to show – apparently due to a communication mix-up – and the committee chair, Mkhuleko Hlengwa, had threatened to subpoena them. Ndyamara stressed that there had been “no intention” to undermine the process and that the liquidators had wanted to provide a proper update on the SA Express situation. He told the committee that interest in the airline had emerged from several potential investors. “There are six interested – in fact, from this morning, there’s about seven interested parties that we’re currently engaging,” said Ndyamara. “The next route for us is to proceed with an investment or a sales process – a transparent process where we either attract an investor or, alternatively, we pursue the disposal of the assets of the airline in order to satisfy creditors’ claims.” While a final liquidation order has been pushed back, Ndyamara pointed out that the airline holds two licences which are scheduled to expire on 31 July. It also has an aviation security training organisation approval which expires on 31 December. He says the liquidators aim to engage a sale or investment process before the expirations. The situation is further complicated by SA Express aircraft and engine lease agreements amounting to R22.5 million per month, plus monthly office and hangar leases of R2.2 million. Ndyamara says that these lease agreements are “onerous” and “immediate consideration” must be given to their termination. But he adds that this could have an impact on the licences. “This is critical for us,” he says. SA Express was placed under business rescue proceedings on 6 February and then into provisional liquidation on 28 April, with Ndyamara and other provisional liquidators appointed on 13 May. Ndyamara says the team’s priority was to reduce the costly R1.8 billion ($104 million) security bond put in place to protect the company’s assets. This involved carrying out an independent market assessment, which evaluated the assets at R103-120 million and reduced the bond to R113 million. SA Express had around R800,000 in cash reserves in its bank accounts, which was ring-fenced. Ndyamara says that, at the time of the provision liquidation order on 28 April, employee salaries for March and April were still outstanding. Employee contracts were immediately suspended as a result of the order. Outstanding remuneration, says Ndyamara, will be dealt with as claims against the company. While employees have special preference under insolvency law, however, they will only be paid after secured creditors’ claims have been settled. “At this stage it is unclear if there will be residue for payment of the employee claims,” says Ndyamara. Chair Mkhuleko Hlengwa says that, following the briefing on SA Express and the previous update on South African Airways’ business rescue, the committee members have resolved to schedule hearings with former boards of directors of state-owned entities. He says the briefing suggest that the collapse of SAA and SA Express might have occurred, in part, as the result of “lack of governance”. “Questions were raised about the role played by the former boards of directors in ensuring proper governance and effective consequence management at state-owned companies,” he adds. Committee members also plan a hearing with the government’s department of public enterprises to “ascertain the loopholes” which, Hlengwa says, have contributed to “failure of effective oversight” of these firms. “[The committee] is also concerned with the movement of senior executives from one entity to another under the department’s watch and wants the department to justify these recruitment processes,” he adds. Representatives of South Africa’s treasury and anti-corruption law-enforcement agencies will similarly be invited to brief the committee, as part of continuing probes into alleged cases of financial mismanagement.

Source: Cirium