Grounding of Max 8 aircraft takes a toll on Comair
Higher costs of maintenance and operations help push airline towards its first loss
Comair’s 74 years of unbroken profitability could come to an end after the listed operator of low-cost carrier kulula.com and British Airways (BA) in SA warned on Thursday that it had swung into a loss in its six-months to end-December.
Comair attributed the expected loss to higher maintenance costs and the grounding of its new Boeing 737 Max 8 aircraft.
The company, which was established in 1946, was recently hit by a number of board resignations after shareholders questioned the independence of some former nonexecutive directors, including former chair Piet van Hoven, who had been on the board since 1993.
Comair, which is set to release the interim results on February 26, said headline earnings per share were expected to be more than 170% lower than the prior comparative period, resulting in a headline loss for the period.
The decrease in earnings relative to the comparative period follows an increase in operational costs and maintenance costs arising from the replacement of five owned B737-400 aircraft with five leased B737-800 aircraft.
In addition, there had been an increase in aircraft line maintenance costs arising from the transition of the fleet from SAA Technical to Lufthansa Technik, Comair said.
Earnings continue to be affected by the grounding of the airline's Boeing 737 Max 8, with Comair saying on Thursday it was still negotiating compensation from the US aircraft maker.
The cash-strapped SAA also failed to make a payment due in December related to a settlement agreement regarding SAA’s anticompetitive conduct in an incentive schemes for travel agents, Comair said.
SAA, which has gone into business rescue, was supposed to pay Comair a total of R1.1bn as part of the settlement agreement. Comair alleged that SAA paid travel agents to divert customers to its flights between 2001 and 2006.
Comair said in the 2019 annual report that SAA had made an initial payment of R389m on February 28, 2019, with the balance payable in regular instalments terminating on July 28 2022.