Comair hits turbulence as costs rise


Comair hits turbulence as costs rise

Published Date: 2020-02-14 | Source: Stephen Gunnion | Author: Stephen Gunnion

Comair hits turbulence as costs rise

Recent headwinds include rising operational costs, the grounding of its Boeing MAX 8 aircraft and the SAA business rescue.

Comair has warned that it will report a first-half loss due to rising operational costs and losses it's taken due to the grounding of its Boeing 737 MAX 8 aircraft.

In a further trading statement, it said earnings and headline earnings per share for the six months to end-December were likely to be more than 170% lower those reported a year earlier. Comair operates and has a licence agreement with British Airways in SA.

Operational costs rose after it replaced five of its owned aircraft with five leased planes, resulting in lease and maintenance costs. It said shifting aircraft maintenance from SAA Technical to Lufthansa Technik added to rising expenses. And compounding its problems, it said earnings continued to be negatively impacted by cumulative losses following the grounding of the Boeing MAX 8 aircraft.

Boeing's MAX 8 fleet was ground globally last year, shortly after Comair took delivery of the first of the two aircraft it had ordered. That followed the crashes of two MAX 8 aircraft belonging to Lion Air and Ethiopian Airlines, which killed 346 people.

Although no accrual for compensation had been raised yet, negotiations with Boeing were underway.

Meanwhile, Comair said last year's settlement with SAA was still up in the air after the national carrier failed to make the payment of the capital and interest amount that was due at the end of December. It said the future recoverability of the outstanding amount was uncertain and it would make an additional loss allowance in its interim results.

Last year, SAA agreed to pay Comair R1.11 billion plus interest of R168 million following a drawn-out battle over commissions the national carrier paid to travel agents between 2000 and 2005, in contravention of the Competition Act. SAA was placed into voluntary Business Rescue on 5 December.

Comair's shares fell 1.8% to R2.70 yesterday.

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