Comair to restructure, cut jobs | Fin24
 
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Comair to restructure, cut jobs

Mar 23 2020 19:08

Comair began a restructuring process on Monday, which it says is an attempt to improve efficiency and financial sustainability. 

The restructure includes the start of a Section 189 process in terms of the Labour Relations Act. It is not yet clear how many jobs could be at stake. 

CEO Wrenelle Stander said in a statement that reducing staff was a decision taken with "great regret". 

"We continue to pursue cost reduction measures across the group to mitigate the impact on our staff," she said.

Coronavirus casualties

According to the statement, the restructure is necessary due to a tough economic climate and the "unprecedented crisis" facing the global industry due to the coronavirus pandemic. 

Comair operates its own low-cost carrier, kulula.com, as well as British Airways in South Africa, under a licence agreement.

Stander said the company's results for the first half of the 2020 financial year showed that, although its revenue grew at 3% during the six months, it could not sustain the additional costs of 14%.

The cost increases resulted from some under-performing investments and significantly higher fleet and maintenance costs which severely impacted the company's profitability.

"While the decision to renew our fleet was the right one at the time, the pace of renewal in an under-performing economy placed a burden on operating costs and profitability. In 2019 alone we took delivery of five additional Boeing 737-800 leases, as well as a new Boeing 737 MAX 8 aircraft," Stander said.

Boeing troubles

The world-wide grounding of the Boeing MAX 8 has also had a negative impact on the company.

Furthermore, although the decision for the company to transfer from SAA Technical (SAAT) to Lufthansa Technik Maintenance International (LTMI) is progressing according to plan, the airline will be paying for two maintenance providers until at least the end of June 2021.

Despite various efforts over the last few months to, among other things, preserve cash, maintain liquidity, divest from non-performing acquisitions and aggressively reducing costs reduction, Stander said more must be, which meant the Section 189 process could not be avoided.

As for the impact of the coronavirus pandemic on the company, Stander said the airline has been cancelling and combining flights in response to lower demand.

"We will continue to adjust our operation to the rapidly evolving situation. For the foreseeable future the primary focus will be on restructuring the balance sheet as well as cash preservation and to focus on the long-term sustainability of the organisation," she concluded.

* Compiled by Carin Smith

comair  |  coronavirus  |  airlines  |  aviation
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