Recovery will be slow, even if Comair can rise above this turbulence
It was only a matter of time before Comair joined a host of airlines across the world to file for bankruptcy protection. The question is: will it make it back? Comair, which traces its roots to the 1940s offering chartered flights to some of the remotest places in Africa, framed the business rescue process — which started this week with the appointment of turnaround specialists Shaun Collyer and Richard Ferguson —
as the best route to revival in the aviation industry’s biggest crisis.
“This is a necessary process to ensure a focused restructuring of the company takes place as quickly as possible so we can take to the skies again as a sustainable business and play our part in the county’s airline industry,” says CEO Wrenelle Stander.
It is true that the business rescue process gives Comair a chance to leave some of its heavy financial luggage —
employee costs, debt repayments and aircraft orders — behind while turnaround specialists slim it down and help it emerge as a fit and lean machine to navigate what looks likely to be a turbulent few years for the industry.
Collyer and Ferguson, the joint business rescue practitioners, will take up from where Stander left off.
Stander, a veteran in the industry, had been on a punishing cost-cutting drive that included laying off workers and cancelling orders for Boeing 737 Max jetliners, which have been grounded by regulators across the world since March 2019 after two crashes that called their safety into question.
TRAVEL BAN
But post-Covid-19 business conditions are likely to be brutal, at least for a few years, even after a vaccine has been developed.
China, which is gradually reopening its economy and easing air travel restrictions, is offering a glimpse of demand recovery trends for when President Cyril Ramaphosa lifts the air travel ban, which Comair expects to be only in October at the earliest.
Though China’s domestic flights climbed more than a fifth in recent months, it was still less than half the flights before the shutdown, suggesting that recovery will be slow for the likes of Comair if it can make the trip back from bankruptcy protection.
Mounting calls about leaving the middle seat of a plane open to respect social distancing guidelines, which are likely to stay in place even after lockdown restrictions have been lifted, should keep Stander on the edge because if that becomes the new normal, it will limit her planes’ capacity to about 70% — not enough to recover the costs of running an airline profitably.
Whether the global industry body, the International Air Travel Association, prevails in persuading governments that there’s no evidence that leaving the middle seat empty reduces the transmission, business and leisure travel is likely to remain subdued for a while longer.
With social media giant Facebook coming to the party with a video conferencing feature for WhatsApp, cashstrapped businesses will find reasons to stay away from airports in the coming months.
THE AIRLINE HAS A SOLID PROFITABLE HISTORY, BUT IT'S GOING TO TAKE A BAIL-OUT TO HELP IT SURVIVE CURRENT CONDITIONS
Assuming Comair can take to the skies again without bankruptcy protection, it is difficult to see how it can keep grinding out profits amid lingering fear about the disease and an increasing array of video conferencing facilities for business meetings.
Shareholders, who have watched in dismay as company stock crashed more than 80% in the past few years, might be talked into throwing money into a company that has more than a seven-decade record of unbroken annual profits.
Failing that, the government could step in with a bailout package that will surely outrage those who felt SAA, which is failing to emerge from its own business rescue after years of government bailouts, deserved one more shot.
But faced with running a sophisticated emerging-market economy without a major domestic airline, Ramaphosa might be left with no choice.