Aviation sector in trouble as Comair goes into business rescue

South African aviation industry is faced with serious financial problems which might make it difficult for some airlines to survive beyond the ongoing lockdown, said an economist.

Jannie Rossouw, head of School of Economic and Business Sciences at the University of the Witwatersrand, said this when commenting Comair which owns low-cost carrier Kulula Airline entered into a business rescue due to its financial problems. "This doesn't come as a surprise, several airlines were in financial trouble before the lockdown, so this has worsened their problems," he said.

While the lockdown measures have exacerbated Comair's finance problem, the company recorded a half-year loss of 564 million rand (30 million USD). Comair board decided to place the company under business rescue this week. "The board considers this decision to be prudent and in the best interest of shareholders while the company and its business practitioners explore solutions to the current situation facing the company," it said in a statement.

Comair has suspended its trading in the Johannesburg Stock Exchange (JSE). Comair is not the only airline that in trouble. State-owned South African Airways filed for business rescue in December while state-owned SA Express was placed under "provisional liquidation" last Tuesday. "This is a sign that the government must be careful about starting a new airline because there's so much uncertainty in the sector," Rossouw added. Domestic airlines will only be allowed to operate in South Africa under stage three of the lockdown.