British Airways’ franchise partner in Africa, Comair, will remain grounded until November 2020 at the earliest.
Comair is currently in a process known as “business rescue” whereby it seeks to restructure itself whilst protected from creditors.
In addition to operating a BA franchise in Africa, Comair also operates the Kulula airline brand and SLOW lounges in Africa.
Business rescue practitioners have been appointed to oversee the process. They have today, Tuesday 2 June 2020, published an outline plan for the company.
Comair’s airlines will remain grounded until November 2020 at the earliest as the company requires a substantial cash injection to resume trading.
The business rescue practitioners have approached 30 potential investors to secure new funding and 6 are in active discussions.
Whilst Comair intends to focus on its airline business, it is expected that Comair’s fleet will be substantially downsized from 27 aircraft to 13 Boeing 737-800 aircraft and three spare Boeing 737-400 aircraft.
With such a significant reduction in fleet it seems implausible that it will continue to operate under both the BA and Kulula names.
Neither BA nor its parent company IAG have made any official comment on the business rescue process. BA owns a 11.49% stake in Comair. If neither BA nor IAG participate in a recapitalisation of the airline, its shareholding will be wiped out.
It will be for Comair’s new shareholders to decide on its business model and whether the BA franchise should continue. Currently, BA is still selling flights on Comair from 1 November 2020.
The UK’s Competition & Markets Authority has opened a consultation on proposals by American Airlines and British Airways to address competition concerns about their transatlantic joint business.
If accepted American and BA would have to make slots available to rival airlines on routes from London to Boston, Dallas and Miami.
American Airlines & BA’s Transatlantic Joint Business
Since 2010, American Airlines and British Airways have operated a transatlantic joint business on routes between Europe and North America.
This allows the two airlines to effectively operate as one airline and co-ordinate schedules and fares on transatlantic routes.
The joint business is seen as advantageous because it allows American and BA to offer high frequencies on major routes, which is particularly attractive to business travellers. More marginal routes can be supported by access to each other’s corporate and frequent flyers.
Finnair and Iberia are also part of the joint business. Aer Lingus is a signatory to the business and is due to join at some point in the future.
Regulatory approval was granted by the European Commission and US Department of Transportation on American and BA’s third attempt. This was in spite of fierce opposition from Virgin Atlantic, which has subsequently joined its own joint business with Delta and Air France-KLM. The European Commission’s original decision can be viewed here.
As a condition of regulatory approval, American and BA had to make slots available to new entrants on five routes from London to Boston, Chicago, Dallas, Miami and New York. These “commitments” were for a period ten years.
These slots have been taken up by Delta, Norwegian and Virgin Atlantic. One slot acquired by Delta, initially for London Heathrow to Philadelphia, is subject to litigation by American Airlines.
The Competition & Markets Authority Review
In 2018, the Competition & Markets Authority opened up a review of the joint-business.
This was in light of the expiry of the above commitments and the UK’s then planned departure from the European Union.
The review has taken considerably longer than expected. This, given with the fact that the CMA has adopted a very interventionist approach in cases outside of aviation, has caused speculation that the CMA would take a very tough line.
It is also a given that there will have been intense lobbying from rival airlines against the joint business, particularly from JetBlue which had planned to launch flights from London to Boston and New York JFK.
The CMA has published its full findings. It has identified competition concerns on five routes from London to Boston, Chicago, Dallas, Miami and Philadelphia.
American and BA have a monopoly on non-stop routes from London to Dallas and Philadelphia and a high frequency advantage on Boston and Miami.
British Airways and Qatar Airways have received final approval from the Australian Competition & Consumer Commission (“ACCC”) to operate a joint-business in respect of flights between certain cities in Europe and Australia.
You could be forgiven for thinking the two airlines already had such a joint business for Australia, but that is not the case.
Whilst BA and Qatar have operated a joint business for some years, this only currently covers flights from the UK to Doha, and many destinations beyond Doha in Africa and Asia.
BA and Qatar have operated a codeshare for many UK – Australia routings such as Manchester – Doha – Melbourne or Cardiff – Doha – Perth which can be booked through BA as a codeshare.
The approval from the ACCC will allow BA and Qatar to take this beyond a codeshare and co-ordinate schedules and fares on a number of routes from Western Europe via Doha to certain cities in Australia which are Adelaide, Canberra, Melbourne and Perth.
London – Sydney is not included in the joint business as BA serves this with its own aircraft, at least for now. Approval was sought before the outbreak of COVID-19, which is likely to have a significant impact on BA’s route network and timetable in the medium term.
Regulatory approval will take effect from 29 May 2020 and will last until 29 May 2025.
Whilst in theory regulatory approval allows BA and Qatar to co-ordinate schedules on these routes, it is unlikely we would see BA flying to Australia via Doha. The main driver behind this is for BA to take advantage of Qatar’s network to Australia from Europe and for Qatar to take advantage of BA’s distribution network.
The new joint business does not seem to disturb BA’s existing codeshares to Australia via Asia with Cathay Pacific, Malaysia Airlines and Qantas.
British Airways’ franchise partner in Africa, Comair, has entered a Business Rescue Process.
This is a formal restructuring process, similar to Chapter 11 in the United States. Business Rescue Practitioners have been appointed to oversee the running of the company and a restructuring, with the aim of avoiding a liquidation.
Originally founded in 1946, Comair also operates the airline brand Kulula and SLOW lounges in Africa. Its airlines are currently grounded and it does not expect to resume operations until October 2020 at the earliest.
British Airways owns a 11.49% stake in Comair. It became a BA franchise in 1996. It operates routes to destinations in South Africa, Mauritius, Namibia, Zambia and Zimbabwe from its main hub at Johannesburg with a fleet of Boeing 737 aircraft.
The BA franchise is clearly very important to BA’s brand presence in South Africa and providing connecting traffic to and from BA’s long-haul routes to London. Comair is one of two remaining BA franchise partners. The other being SUN-AIR of Scandinavia.
Comair’s state owned rival South African Airways is expected to be liquidated with a new airline formed.
Comair has issued the following statement. Note the comment from its CEO Wrenelle Stander about reviewing joint-ventures. Whilst Comair’s BA franchise is highly regarded, it is of course at liberty to end its franchise agreement with BA.
British Airways and China Southern Airlines have announced plans to launch a joint business in respect of flights between the UK and mainland China.
Currently, BA and China Southern Airlines have a limited codeshare relationship with BA placing its code on China Southern Airlines operated flights from Shanghai when connecting to/from BA operated flights between London and Shanghai. China Southern Airlines also places its code on a number of BA short-haul flights from London Heathrow.
Under the joint-business the two airlines will offer full codesharing on each other’s routes between London and mainland China. They will also offer reciprocal benefits to each other’s frequent flyers.
Currently, BA flies from London Heathrow to Beijing Daxing and Shanghai airports. China Southern Airlines flies from London Heathrow Terminal 4 to Guangzhou, Sanya, Zhengzhou, and Wuhan.
The expanded codeshare relationship will take effect from Thursday 2 January 2020 and flights are on sale from today, Tuesday 17 December 2019. The two airlines are expected to explore further co-operation in 2020.
For BA, this does substantially improve its coverage of mainland China where it has been relatively weak compared to other European network airlines, partly due to the lack of a local alliance partner.
BA does also have a local codeshare relationship with China Eastern Airlines which does not appear to be disturbed by this news.