South Africa’s political opposition is insisting the government detail an agreement with South African Airways unions setting out plans to establish a successor to the crumbling flag-carrier. In a response accusing the department of public enterprises of undermining SAA’s business-rescue practitioners, the Democratic Alliance says it will seek a commitment that the government will not make “any further bailouts” to the airline, or provide any state guarantees or other form of security. It is to ask public enterprises minister Pravin Gordhan for clarity on a “leadership compact” reached between various parties in SAA, arguing that the information provided about the agreement is “scant on detail”. “The question that all South Africans will be asking is whether or not this deal includes yet more billions of rands in bailouts to keep the bankrupt airline going,” says the party, “and whether or not majority ownership of SAA will be transferred to private equity?” SAA had been undergoing business rescue but the process ran out of funding, leading the rescue practitioners to state the carrier had only two options – either immediate liquidation or a deal with employees for a retrenchment package. But the department of public enterprises says the new agreement is part of a “bold and audacious” process committing all parties to a “new approach”, demanding “major performance-based culture change” if South Africa is to retain competitive and profitable international airlift through a strategic national asset with both public and private participation. “It will not be the old SAA but the beginning of a new journey to a new restructured airline, which will be a proud flagship for South Africa,” the department states. “The transition to the new airline may require sacrifices, pain and hardships for all concerned, particularly for those employees who may be displaced.” It adds that it is working with unions on a business model to give a new national carrier a competitive edge. “The agreed intention is to produce an airline which is a catalyst for investment, job creation in key sectors, economic growth throughout all regions of the country,” the department states, “and is a mirror to the world reflecting the splendour and beauty of our great nation.” But the Democratic Alliance describes as “astounding” the unions’ and public enterprises minister’s belief that they can enter an agreement that “apparently has no details” and that SAA’s rescue practitioners – Les Matuson and Siviwe Dongwana – are simply expected to implement it, regardless of the expiry of a 1 May deadline for retrenchment packages. The opposition party accuses the minister of sidelining the practitioners, and says the practitioners are allowing the minister to “dictate” to them a course of action. “It is unbelievable,” it adds, pointing out that the practitioners have an obligation to follow South African company law and either devise an acceptable rescue plan or, if this is not possible, apply for liquidation. Heavily loss-making SAA has spent five months in business rescue and the emergence of the coronavirus crisis has essentially wrecked the carrier’s chances of survival. “The public deserves clarity on the future of SAA and the full details of any agreements the minister has entered into,” says the Democratic Alliance. It adds that the government needs to guarantee that public money will “not be wasted on a lost cause”, particularly during the coronavirus crisis.

Source: Cirium

South Korea's Ministry of Land, Infrastructure and Transport (MOLIT) will invest W1.55 billion ($1.3 million) in the pre-purchase and prepayment of airline tickets to support local airlines. This accounts for 85% of MOLIT's annual air travel budget, and it envisions broader participation across public sectors, it said on 3 May. The airlines will refund any outstanding prepayments to the relevant agency by the end of this year and must have warranty insurance for this purpose. Under this scheme, the ministry targets to purchase 30% of local LCCs' air tickets for domestic travel. The ministry says: "It will be a great help to airlines that are struggling with temporary liquidity shortages through the pre-purchase and prepayment of air tickets from the central government, local governments, and public institutions." MOLIT also encourages voluntary participation by the private sector, in light of industry-wide support measures recently announced to mitigate the impact of the Covid-19 outbreak on South Korea's economy. From March to June, tax deductions on personal credit or debit card spending have been doubled, from 40% to 80% for spending on transportation.

Source: Cirium

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