The National Union of Metalworkers of South Africa is not convinced there is a “genuine need” for Comair [JSE:COM] to retrench staff, the union said on Wednesday.

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

The union says it was informed by Comair that about 200 employees could be affected in a Section 189 retrenchment process started by the company in terms of labour law requirements.

A week ago, Comair announced the start of a restructuring process, saying it was an attempt to improve efficiency and financial sustainability due to a tough economic climate and the “unprecedented crisis” facing the global industry due to the coronavirus pandemic. 

In this statement, the management of Comair said the reasons for retrenching were unrelated to the coronavirus pandemic.

According to Numsa, the S189 letter received by employees explains the restructuring as being due to the impact of the grounding of the company’s Boeing 737 MAX 8 fleet amid a worldwide grounding of these aircraft; volatile fuel prices; and the weak rand. 

Furthermore, additional maintenance costs and delays resulted in a need to lease additional aircraft, which, in turn, significantly increased operating costs. The company also points to an over-capacity in the market and over-staffing, both at executive and other employee levels.

On top of that, due to South African Airways (SAA) having gone into business rescue in December last year, the state-owned airline has defaulted on scheduled payments of R790 million still owed to Comair as part of a R1.1 billion settlement relating to a competition case.

Unconvinced

But Numsa is not convinced that there is a need to retrench staff. It claims the airline is contradicting itself.

“In terms of their initial application for Section 189 they say the spread of the Covid-19 virus has no bearing on the decision, but in their communication to staff they claim that they can’t afford the lockdown, which is why they have applied for temporary relief through the UIF,” Numsa says in its latest statement. 

“We think that this is another example of a private company using the Covid-19 pandemic in order to justify restructuring of the organisation, for their own commercial gain.”

In February this year, Comair reported a headline loss of R564 million for the six months ending December 31, of which R450 million was attributable to the increase in a loss allowance on the SAA damages settlement. 

Earnings per share (EPS) declined by 543% to a loss per share (LPS) of R1.205 per share and headline earnings per share (HEPS) decreased by 546% to a headline loss per share (HLPS) of R1.212 per share. Revenue increased by 3% to R3.8 billion.

At the time, Comair group CEO Wrenelle Stander told Fin24, regarding various board resignations in the past, that it followed on from an earlier board meeting where the board charter was reviewed, and it was decided to create greater alignment with King IV governance principles.

Board concerns

Fin24 reported in early November that concerns were raised at Comair’s annual general meeting (AGM) about the long tenure of board members. A resolution was approved at the AGM that directors who served for a period of nine years or longer would be required to retire on an annual basis and if eligible, could stand for re-election. 

Pieter Van Hoven resigned as an independent non-executive director and lead independent director of the company and Derek Borer resigned as company secretary. In August 2019, it was announced that Van Hoven decided to retire as chairperson of the board after serving in this position for about eight years.

Lindsay Ralphs, who is also the CEO of Bidvest, replaced Van Hoven as Comair chair at the group’s AGM in October last year. Rodney Sacks, a long-standing non-executive director, resigned earlier this year as well as Sean Doyle, an independent non-executive director. Martin Moritz, a non-executive director and deputy chair, resigned at the end of last year as well as Dr Piet Welgemoed, an independent non-executive director.

In June 2019 it was announced that Phuti Mahanyele-Dabengwa resigned as a non-executive independent director “for personal reasons”. In July Naspers announced the appointment of Mahanyele-Dabengwa to the global Naspers management team as CEO, South Africa.

In May 2019, Erik Venter resigned as CEO of Comair for personal reasons after having been with the company for 23 years.

Fin24 approached Comair for comment on the latest Numsa statement and was referred to its restructuring statement of last week (March 23).

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