South African carrier Comair has agreed to call off its planned acquisition of aircraft leasing specialist Star Air Cargo and Star Air Maintenance as it battles mounting challenges. Comair agreed a deal with sellers Sundrops Investments, Smashing Star Investments and Marcel Liebenberg last summer for the acquisition. Comair was to pay R75 million ($5.1 million) plus a profit-share payment, capped at R250 million, for the acquisition. The deal also included the option of a one-off R150 million settlement payment. But in a brief stock-market statement today, Comair says: "Shareholders are now advised that with effect from 31 March 2020, the parties by mutual consent, agreed to terminate the agreement, such that the agreement shall cease to have any further force or effect." While no reason has been specified for the deal being abandoned, the airline has been dealing with the impact of the coronavirus crisis on top of a series of existing challenges. Comair, which operates flights as a British Airways franchise carrier and under the Kulula low-cost brand, has suspended all flights until 19 April during South Africa's national lockdown. It last month said that for the "foreseeable future the primary focus will be on restructuring the balance sheet as well as cash preservation". Even before the coronavirus crisis, Comair had been dealing with challenges including a difficult economic environment, the grounding of the Boeing 737 Max and additional costs while it transitions to a new maintenance firm. "Our results for the first half of the 2020 financial year showed that although our revenue grew at 3% during the six months, we could not sustain the additional costs of 14% resulting from some under-performing investments and significantly higher fleet and maintenance costs which severely impacted the company’s profitability," said Comair chief executive Wrenelle Stander in a trading update on 23 March. "While the decision to renew our fleet was the right one at the time, the pace of renewal in an underperforming economy placed a burden on operating costs and profitability. In 2019 alone we took delivery of five additional Boeing 737-800 leases, as well as a new Boeing 737 Max 8 aircraft." The grounding of the Max added costs through the wet-lease of aircraft to replace three of the type, as well as through $45 million in cash being locked-up in pre-delivery and interest payments related to the acquisition. Meanwhile, the transfer of maintenance from SAA Technical to Lufthansa Technik, while progressing as planned, means that the airline will be paying for two providers until at least end June 2021. "Despite our efforts over the last few months to preserve cash, maintain liquidity; divestment from non-performing acquisitions; aggressive cost reduction across the group; taking back control of the fleet; and unlocking further operational efficiencies, more remains to be done," says Stander. Comair on 23 March initiated a formal labour restructuring process as part of further efforts to reduce its costs.

Source: Cirium

Virgin Australia has closed its New Zealand flight crew base, a move their union says affects around 600 jobs. The E tū union said in a 4 April statement that the carrier emailed staff the previous night telling them that the closure was effective immediately. Virgin Australia has already suspended operations at its Tigerair Australia subsidiary and asked for a A$1.4 billion ($840 million) government bailout as it battles the coronavirus-induced downturn. E tū assistant national secretary Rachel Mackintosh says the union "isn't convinced Virgin needed to close so quickly" and the carrier should have applied for the New Zealand government wage subsidy. “We are urging all employers, in aviation and beyond, to take advantage of the government wage subsidy and not let the workers bear the full brunt of the downturn,” she states. Virgin Australia said on March 25 that it was starting a consultation over the proposed closure of its New Zealand cabin crew and pilot base as part of measures “to streamline and safeguard the group’s domestic and short-haul international businesses through Covid-19.”

Source: Cirium

Virgin Australia may not get the government support it is seeking, according to local media reports. Citing sources, the Australian Financial Review reported on 2 April that the federal government wants two strong airlines after the coronavirus crisis and would help a new carrier enter the market if Virgin Australia collapses. Virgin Australia, the country’s second largest airline, confirmed on 31 March that it was seeking A$1.4 billion ($850 million) in financial support from the government, which could potentially be converted into equity. Separately, prime minister Scott Morrison did not give a direct response when asked about the Virgin loan at a media briefing in Canberra on 2 April. "I can only point to the decisions the government has made and those decisions have been made on a sector-wide basis," the Australian Associated Press quotes him as saying. On 18 March, the government announced an aviation relief scheme worth A$715 million, comprising the waiver of certain fees and charges. A separate package for regional air travel, worth an initial A$198 million, was unveiled on 28 March. Speaking on an ABC Radio National programme, Virgin Australia chief executive Paul Scurrah said on 2 April any expectations that another airline could emerge quickly to rival Qantas were unrealistic. He stated: “Pretty much every single airline in the world is being supported by their governments and none of those governments will accept those airlines spending the rescue packages they have been given in another country." Virgin Australia’s main shareholders are Etihad Airways and Singapore Airlines, along with Chinese conglomerates Nanshan Group and HNA Group, as well as original founder Richard Branson. Scurrah said Virgin Australia is talking to its shareholders about financial support, but highlighted that they themselves, as aviation groups, are also struggling with the crisis.“It’s important to point out that a lot of our owners are in the same boat, hence us talking to the government about a bridging facility to help us get through,” he said. Alan Joyce, chief executive of rival Qantas has previously said that the Australian government must treat all airlines equally and that nationalising Virgin Australia would be unfair. He said on 20 March: “One of the things that the government has to do, is that it can’t pick winners and losers. Whatever aid is given to one company has to be given to everybody in that sector. Qantas needs to be treated equally.”

Source: Cirium