Comair, which operates two airlines in South Africa, climbed the most in more than six months yesterday, with the collapse of rival carrier 1Time Holdings, which on Friday grounded its planes and filed for bankruptcy.
Comair’s shares rose as much as 17.2 percent during the course of the day, the most in more than a year. It closed 10.34 percent higher at R1.60.
About 2.8 million shares changed hands or 18 times the daily average over the past three months.
“Investors are speculating that kulula.com and British Airways stand to benefit from 1Time’s closure,” Investec Asset Management equity dealer Ryan Wibberley said.
According to Airports Company South Africa communications manager Solomon Makgale, 1Time had accumulated a debt of just less than R150 million over seven months. But since going on business rescue three months ago, it had been on cash payment terms and had been paying regularly.
The collapse of the airline, which closed down unexpectedly on Friday after hopes of bridging finance while it traded its way out of trouble were withdrawn, has sparked a war of words between Comair chief executive Erik Venter and Mayihlome Tshwete, the spokesman for Public Enterprise Minister Malusi Gigaba.
Venter said although 1Time had been hit by the soaring cost of aviation fuel, which made its fleet uneconomic to operate, he believed it would have survived if state-owned and subsidised SAA had not started a low-cost division, Mango, to compete with it and with Comair’s low cost division, kulula.com.
Tshwete argued no government department would be happy about the loss of the roughly 1 000 jobs caused by the closure of 1Time.
He said that the airline’s closure was as a result of “several contributing factors” and it was “unjust” to blame Mango’s entry into the market.
Venter said yesterday that although the uneconomic fleet it still operated made the ultimate closure of 1Time inevitable, “we are certain that in the absence of state-subsidised Mango, 1Time would have made enough profit to enable it to upgrade its fleet and be sustainable over the long term”.
Based on the previously released financial statements of SAA and recent parliamentary comments, Mango made a loss of R500 million since its launch in 2006, based on undercutting the viability of the private low-cost carriers.
Venter said this brought into question Mango’s role in the South African market because of its failure to disclose its financial statements “as required of all state-owned enterprises by the Public Finances Management Act” and the government’s breach of its own aviation transport policy when the industry was deregulated to allow competition with SAA in the domestic market.
Venter said Comair focused strongly on re-engineering its own operations after suffering its first loss in the first half of its last financial year and it had returned to profitability by June this year.
Along with a cost-saving programme, which included a salary freeze for all employees, the airline had upgraded its fleet “resulting in kulula.com having the most fuel-efficient fleet” in the industry.
“While we will obviously put up resistance to the unfair competition from SAA and Mango this is not new to us. We have been dealing with it for most of our history,” he said.
Tshwete said there were a number of reasons why 1Time had gone bankrupt, in addition to its older generation fleet, and it was unfair to blame Mango, which had competed with 1Time on three routes. – Additional reporting from Bloomberg.