Comair mulls B737 MAX deferral citing SA's weak growth

Comair (South Africa) (MN, Johannesburg O.R. Tambo) could defer deliveries of two of the eight B737 MAX 8s it has on order from Boeing (BOE, Chicago O'Hare) owing to South Africa's weak economic growth.

The firm's Chief Executive Officer (CEO) Erik Venter told Reuters that Comair could delay the delivery of two of four MAX 8s due in 2019, to as far out as 2022. Under the original plan, the order would have run from 2019 through to 2021 with pre-delivery payments of USD9.7 million to have been made during 2H FY2017.

Comair said in a 1H FY2017 earnings disclosure in December last year that South Africa's weak economy would continue to squeeze consumer spending thus putting further pressure on airline industry margins. This is expected to worsen if Statistics South Africa's GDP estimates for the first quarter of 2017, due out next week, confirm the country's economy has indeed entered into its eighth recession since 1961. The country's economy suffered a 0.3% contraction in GDP for the last quarter of 2016 and credit downgrades to sub-investment grade earlier in April.

For its part, Comair operates a British Airways (BA, London Heathrow) franchise as well as a low-cost carrier unit, Kulula Air (MN, Johannesburg O.R. Tambo). Collectively, it employs a total of eleven B737-400s and sixteen B737-800s.
Concerning the firm's recent submission of an Expression of Interest (EOI) in Air Botswana (BP, Gaborone), Venter said Comair's proposal was not to acquire a stake in the ailing state-owned carrier, but rather for Comair to operate the service for the Botswana government.
"We'd rather start with a fleet and set up a new operation using Comair's back-end infrastructure," he said.

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