Earlier this year, it was reported that 1time Airline was in serious financial trouble, and some even wondered if they’d be around next year. 1time now requires a business rescue as they are “financially distressed”, and owe millions.
The losses have increased monumentally for the budget domestic carrier during the last few years. These included a net loss for the 2011 financial year of R157 million, after a loss of only R11 million in 2010. The firm now had about R320 million in short-term debt, and said it had been in negotiations with creditors since March this year.
1time Holdings’ board said yesterday the company’s subsidiaries, 1time Airline and Jetworx Aircraft Services, required business rescue as they were “financially distressed”.
CEO Blacky Komani:
We couldn’t agree with some of the creditors and the next alternative is to file for business rescue, which is what we have done. It is money that we owe for services and for some operational costs. We [the new management] inherited it.
He remained defiant in the face of danger and continued that: “For us it is business as usual and we will fly tomorrow and for the days to come.”
After two of the company’s founding directors resigned from the board and sold off the majority of their shares earlier this year, the company pinned its hopes on a turnaround strategy to cut costs – high fuel prices, fierce competition, weak demand and large increases in airport and navigation taxes are footing the blame, and that turnaround has not happened.
So far, the strategy appears to have failed, and as the company continues to suffer negative press after a series of aircraft problems, including a “special investigation” into one particular aircraft responsible for engine failure twice in a little over two weeks, things don’t appear to be getting better.
1time’s shares have fallen by 91% over the past two years, from about 155 cents a share to close at 14 cents a share yesterday. In May, the shares hit their lowest level ever and closed at 2 cents a share.
Komani continued:
What we need is time to present a turnaround strategy for the business, which will be sold to creditors and investors. Business rescue gives you protection from creditors that may want to file for liquidation while you are turning the business around.
The company would now look to its business rescue specialist (yet to be named) for advice, and would also be cutting unprofitable routes and renegotiating expensive, dollar-denominated aircraft leases.
[Source: Business Day]
