Almost half of South Africa’s aircraft capacity is lost

Comair, which operates British Airways and low-cost airline Kulula in South Africa, applied for liquidation on June 9, 2022. The move came more than a week after all flights were unexpectedly suspended due to an acute lack of liquidity.

The search for a financier for Comair, which has been under supervision since mid-2020, has not been successful. This was announced by the two administrators in a statement to the media on 9 June. As a result, there is no reasonable prospect of a rescue of the company. One of the administrators, Richard Ferguson, expressed his regret by saying that Comair, with its two aviation brands, large market shares, modern fleet, experienced staff and good sales and distribution networks, is by nature a viable business.

The liquidation of Comair will mark the end of a piece of South African aviation history. The airline flew from 1946 and boasted of having profits for 73 years in a row.

cause

As previously written on Up in the sky In mid-2020, Comair voluntarily entered into ‘case rescue’ (corporate rescue), which involved suspension of payments, family supervision order and a rescue plan monitored by administrators. Both airlines, British Airways and Kulula, continued to fly. In addition, like the rest of the aviation industry, they were severely hampered by the Covid pandemic and, more recently, by sharply rising fuel prices. A five-day flight ban in March last year due to security incidents was a further setback.

business magazine Fin24 also pointed to Comair’s order for eight Boeing 737 MAXs, which turned out to be disastrous after the plane was put on the ground worldwide after two fatal accidents. Comair had paid $ 45 million in advance and the first aircraft had already been delivered. Due to the issues with MAX, the company wanted to get rid of the MAX order. There have been lawsuits in the US against Boeing about this for years.

According to aviation economist Joachim Vermooten – affiliated with the University of Johannesburg and advisor to the South African Ministry of Transport – Comair has in recent years welcomed the use of too many aircraft on too many routes in an uncertain market. He also criticizes the government’s policy of limiting foreign investment in South African airlines to 25 percent. That limit on raising capital from countries with strong currencies limits financial resilience, he told the Tourism Update website.

Followand for South Africa

Comair’s sudden shutdown of all aviation activity was seen primarily as a blow to customers with airline tickets and travel plans. South African Airways and Airlink agreed with Comair to take over booked flights within a few days. Comair also agreed to refund unused tickets. The larger banks promised their customers help in reversing bank transfers.

It quickly became clear that the loss of 40 percent of aircraft capacity has far-reaching consequences for the entire domestic air market. This means an acute shortage of capacity, resulting in price increases. The South African competition authority urged the airlines not to take advantage of the situation with exorbitant price increases. Flysafair, Airlink and Lift also agreed. Prices will rise, but not excessively, the chairman of the competition authority noted on the news channel eNCA.

The new situation in South Africa’s domestic air market has now led to a price increase of 30 percent and a reduction in the share of cheap seats on popular routes, it says. news 24 after a statement.

And now on

When the liquidation of Comair becomes final, five domestic airlines will remain in South Africa: SAA, FlySafair, Lift, Airlink and Cemair. According to the business travel company Corporate Traveler, these are in good condition, but unable to meet the demand for capacity in the short term. CEO Oz Desai estimates that over the next three months, air supply will not exceed 70 percent of domestic demand. In April, it was back at 90 percent of the pre-pandemic level. Domestic flights are expected to be more economical and more expensive for longer periods of time than people are used to.

But according to Gidon Novick, CEO of SAA’s majority shareholder Takatso, it’s primarily rising fuel prices that are currently affecting ticket prices. He takes into account that many people will give up air travel because it will be too expensive for them. Incidentally, the loss of Comair to Gidon Novick will be a bit disadvantageous. He is not only involved in the SAA, but is also a co-founder of the price fighter Lift, which was established in 2020. Both airlines are expected to take over a large part of Comair’s market share.

Leave a Comment