South Africa's Comair is in "a very difficult financial position" due to coronavirus-related travel restrictions and does not anticipate being able to resume flights until October or November, the carrier has disclosed. In a 30 April cautionary announcement to shareholders, Comair writes: "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." It advises shareholders to "exercise caution when dealing in the company's securities until a further announcement is made". Comair says it has been "unable to operate" since 17 March and none of its business divisions have generated any revenues. Citing the South African government's plan to gradually ease lockdown restrictions, Comair says it does not expect to begin operating before October or November. The airline – which operates flights as a British Airways franchise carrier and under the Kulula low-cost brand – has taken a number of actions aimed at mitigating the impact of the lockdown on its finances. These include initiating plans to reduce the number of executives and other staff, terminating its planned acquisition of aircraft leasing specialist Star Air Cargo, and beginning negotiations with banks over a possible convertible loan note issuance. Comair incurred an operating loss of R562 million ($31 million) in the second half of 2019, which it attributed mainly to South African Airways' having gone into business rescue, saying the flag carrier owed it R790 million. Operating expenses in the six months ended 31 December increased 13% to R3.6 billion as a result of "significantly higher fleet and maintenance costs" and the Boeing 737 Max grounding.

Source: Cirium

Lufthansa pilots represented by trade union Vereinigung Cockpit have offered to waive up to 45% of their salaries for two years, in return for job security, to help the airline navigate the coronavirus crisis. In March, the union and airline agreed short-time working arrangements for pilots – a first in Lufthansa's history. The target was a 50% reduction in flightcrew costs. But Vereinigung Cockpit says the measure is "not enough" to bring the airline through a "crisis with an uncertain length". The union says the partial waiving of salaries and an additional reduction of current short-term work pay will together deliver savings of €350 million ($374 million) over a two-year term to 30 June 2022. Lufthansa management has met with staff representatives and unions today to discuss the airline's situation, Vereinigung Cockpit notes. In return, the union demands that Lufthansa Group's senior executive team is "committed" to employees and does "everything possible to overcome the crisis together with [staff] in a social partnership". The union asserts that a potential "protective shield" state-aid procedure would not meet those requirements. Lufthansa Group is in talks with governments in Germany, Austria, Belgium and Switzerland to secure the company's solvency, it says. Vereinigung Cockpit president Markus Wahl states that pilots are committed to a "special responsibility" as staff in the "upper pay level". He says pilots would not shy away from "painful cuts", but adds: "It is important that the jobs are preserved and protection against dismissal is agreed." Vereinigung Cockpit notes that the offer covers pilots employed under a collective agreement spanning flightcrew at Lufthansa mainline, the cargo operation, the Germanwings unit, and the flight-training organisation. Lufthansa has not adopted short-time working for Germanwings pilots and earlier this month announced a plan to close the operation, which has been suspended as part of capacity cuts amid the coronavirus crisis. Cirium understands the operation has not yet been dissolved. Vereinigung Cockpit tells Cirium that its salary-waiver offer is an attempt not to reverse the decision to close Germanwings but to improve job prospects for pilots at that carrier. The union notes that in 1992 Lufthansa pilots waived a third of their salaries to help the airline through an economic crisis.

Source: Cirium

European authorities are putting forward proposals to ease airline licensing rules and ground-handling companies’ regulatory burdens, with the intention of reducing costs during the coronavirus crisis. Airlines which are unable to meet financial obligations over the next 12 months would normally have their operating licences revoked, or be issued with a temporary licence to enable the operator to restructure. But the European Commission states that a temporary licence “sends a very negative signal” to the market about the airline’s ability to survive – impeding cash-flow and exacerbating its financial problems. “It is likely that many airlines, which were financially healthy before the crisis, will end up in a situation whereby their liquidity problems lead to the legal need for their operating licence to be suspended, revoked or replaced by a temporary licence,” it states. The Commission says this would create an unnecessary administrative burden with no clear safety or economic benefit, and it is proposing to suspend temporarily this obligation on the condition that safety is not jeopardised. It also says that the coronavirus crisis is likely to last for several months, which means temporarily lifting procedural requirements on emergency measures relating to traffic rights, which were originally designed to address short-term issues. This will enable states to keep proportionate emergency measures in place beyond 14 days. The proposal will extend until the end of 2021 the contracts of European Union ground-handing suppliers which were due to expire by the end of this year. This is intended to provide greater security to the creditors of ground-handling companies, whose activities have been badly hit by the crisis. “Bankruptcies [of ground-handlers] would be detrimental to the entire sector in that they would restrict competition in the short and medium term – and lead to a disruption of ground-handling services, which could also affect the recovery,” the Commission says. It adds that it will introduce an urgent procedure allowing an airport operator – in the event of a ground-handling company’s collapsing – to directly choose a replacement handler, for a six-month period, without having to organise a formal selection process. European transport commissioner Adina Valean says the proposals “should allow companies in the [air transport] sector to start focusing on their much-needed recovery”.

Source: Cirium