Wednesday, August 22, 2012

► SOUTH AFRICA: Financial vultures gather around a defiant 1Time as USD40million debt millstone takes its toll.

Financial news-wires were today abuzz with reports that following an urgent board meeting, 1Time Holdings, parent company to South African LCC 1Time (T6) and Jetworx Aircraft Services, had filed for "Business Rescue" for the two companies (essentially a 3 month long protection period from creditors that may want to file for liquidation while you are turning the business around, more or less equivalent to filing Chapter 11 in the US) as revelations came out that the company has nearly USD40million worth of short term debt to settle with creditors by 31 August, amongst whom are the South African Air Traffic and Navigation Services and various fuel suppliers. Unsurprisingly, by the end of trading today on the Johannesburg Stock Exchange, 1Time shares had plunged by 50%.

Under South African Law, 1Time should now pass into the hands of The South African Companies Intellectual Properties Commission (CIPC) who are responsible for approving a Nominated Business Practitioner who in turn will oversee 1Time's business plan reform process over the coming next three months.  How this will impact the airline's Zimbabwean LCC venture - Fresh Air - only recently launched, is uncertain.

An announcement by the CIPC on whether or not 1Time is eligible for "Business Rescue" will be made on Thursday 23 August.

1Time at Harare Airport, Zimbabwe
1Time in Zimbabwe. (Luck Brown)
The filing for "Business Rescue" comes after a very tumultuous first 6 months of the year for the South African carrier in which its previous CEO (Rod James) resigned following a disastrous record USD$18million loss for 2011 blamed on "high fuel prices, fierce competition, weak demand and steep spikes in airport and navigation taxes." In recent weeks, the airlines image has also been damaged as two of its McDonnell Douglas MD83s suffered engine shut downs inflight.

However, despite the bleak outlook, 1Time has managed to retain some prestige as the most punctual airline in South Africa for June and July. CEO Blacky Komani, too, has remained resolute stating:
"It is business as usual and passengers have nothing to fear."

This storm of events and their resultant dire consequences for 1Time are in stark contrast to that of Government run SAExpress (SAX), whose inability to produce audited financial results for their 2010/2011 Financial Year and a subsequent USD120million accounting hole, simply resulted in the dismissal of the board with no apparent legal action brought against anyone. Ah, such is life in the world of parastatals.

We here at The Tribune wish 1Time all the best, as this year so far has proven to be lethal for the South African aviation scene in general: LCC VelvetSky bit the dust in February after only 12 months in the air, whilst traditionally strong Comair Holdings (Kulula and BA Comair's parent company) also took heavy losses, and with global fuel prices set to remain above USD100 per barrel it seems we could be in for an even more interesting Q3 and Q4 for 2012.

Lets just hope that the path to financial solvency is conquered with spirit and innovation, not government handouts and mediocrity.