BIZweek n°287 24 avr 2020
BIZweek n°287 24 avr 2020
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  • Parution : n°287 de 24 avr 2020

  • Périodicité : hebdomadaire

  • Editeur : Capital Publications Ltd

  • Format : (260 x 370) mm

  • Nombre de pages : 9

  • Taille du fichier PDF : 7,4 Mo

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VENDREDI 24 AVRIL 2020 BIZWEEK ÉDITION 287 Stock exchange : The market continued its slump The stock exchange session this week, according to reports of AXYS Stockbroking, has been marked by continuous slump. Put aside the fact that Air Mauritius has been put under voluntary administration on Wednesday because of financial difficulties. Last Friday’s session saw four stocks recede for every gain extending the downstreak to five consecutive days. Omnicane (-8%) and Semaris (-7%) regurgitated part of the previous day’s strong gains, while Beachcomber surged (+9%). Gold (NewGold ETF) was actively traded in Friday’s session at Rs645 (+6%). On Monday, domestic indices receded by almost 1% extending their slides to a 6th consecutive day having recorded 5 times more drops than gains. Trading was overwhelmingly [84%] skewed towards financial and property [10%] stocks. Monday’s five most active stocks madeup 92% of the Rs 56 M traded. The relatively sharp drops recorded in the financial (-2.0%), Property (-1.6%), Hospitality (-2.7%), and Conglomerates (-0.8%) were for the vast majority on slim exchanges. MCB Group which slipped to Rs225 (-1.3%) recorded the bulk of foreign exchanges [97%] with a net outflow amounting to Rs 16 M. Tuesday : In a session where exchanges were scattered, as best exemplified by the atypical set of most active stocks ; and drops outnumbered gains 2-to-1, it was MCB Group’s 4% drop – steepest since Apr 6th – to Rs 215 which singlehandedly dragged Mauritian indexes further into negative territory. Hotels shed between 2-3% ahead of their long road to post-Pandemic recovery, and Conglomerates – with a trio of exceptions – gaveup 1-4%. Except for Semaris (-9%) other large movers – C-Care (-11%), BMHL (-10%) and Lavastone Properties (+10%) – all did so on slim volumes. Wednesday : Market turmoil continues LA TOUR The major event, this week, has been the announcement of voluntary administration of Air Mauritius. Its share price had gained 20 cents to Rs 5.80 prior to the announcement. The Stock Exchange of Mauritius has since suspended trading on the airline FINANCIAL CRISIS as the Mauritian market slumped for its 8th straight session. Turnover amount to an above average Rs 91 M largely geared towards MCB Group [75% of Total Market Turnover] which retreated to Rs210 (-2.3%) on the back strong foreign participation [46% of Value Traded on MCB Group which resulted in a slight net foreign divestment on the order of Rs 13 M]. Lottotech was the 2nd most active stock with 1M shares exchanged at a flat Rs8.30 in session were the Drops-to- Gains Ratio stood at 1.5 times resulting in 1% slump in indexes. Top Gainers Omnicane (+15%) and Indigo Hotels (+13%) surged on slim exchanges. Air Mauritius under voluntary administration The Board of Directors of Air Mauritius Limited met on the 22nd of April to take cognizance of the latest financial status of the Company. In light of the recent developments worldwide relating to the COVID-19 crisis, the company has been placed under voluntary administration. Its share price had gained 20cts to Rs 5.80 prior to the announcement. The Stock Exchange of Mauritius has since suspended trading on the airline According to the communiqué issued by Air Mauritius, the immediate future remains uncertain, mostly in relation to the COV- ID-19 crisis : It was noted that, in January 2020, the Board had setup a Transformation Steering Committee with a view to addressing the financial difficulties of the Company and to reviewing its business model for ensuring a sustainable future. Wide consultations were held with all concerned stakeholders and substantial progress was made in formulating the Action Plan to be recommended to the Board. Unfortunately, travel restrictions and the closure of borders in all our markets and cessation of all international and domestic flights in an unprecedented crisis, has led to a complete erosion of the Company’s revenue base. Furthermore, there is uncertainty as to when international air traffic will resume and all indications tend to show that normal activities will not pickup until late 2020. In these circumstances, it is expected that the Company will not be able to meet its financial obligations in the foreseeable future. The Board, therefore, took the decision to place the Company under voluntary administration in order to safeguard the interest of the Company and that of all its stakeholders. Sattar Hajee Abdoula, FCA and Arvindsingh K. Gokhool, FCCA of Grant Thornton have been appointed, under sections 215 and 216 of the Insolvency Act, as administrators of the Company, with effect from Wednesday 22 April 2020. 4 Cont’d on page 5
VENDREDI 24 AVRIL 2020 BIZWEEK ÉDITION 287 As airlines around the world struggle for survival, South African Airways too has become a casualty of the coronavirus. The South African flag-carrier has suspended all commercial passenger flights due to COVID-19 and plans to lay off its entire workforce, offering severance deals to all 4,700 staff from the end of this month after administrators concluded that a successful turnaround is unlikely. The coronavirus may prove the final nail in the coffin for SAA, which was reducing routes and considering job cuts even before the outbreak forced airlines around the world to ground airplanes. South African Airways, which began operations in 1934, last made a profit in 2011. It has since rackedup US$1.4 billion in losses over the last six years and has relied on bailouts and state-guaranteed debt agreements to keep flying. The team of administrators will now look to sellassets and raise cash to repay creditors. SAA is among several state-owned companies to have become technically insolvent without financial assistance from the South African government, following years of mismanagement and corruption scandals. Virgin Atlantic owner Sir Richard Branson has warned that the beleaguered airline will need government financial support in order to survive the coronavirus crisis. In a blog post to Virgin employees, Branson said : «The reality of this unprecedented crisis is that many airlines around the world need government support and many have already received it. Virgin has applied for a state-aid package of commercial loans and guarantees worth hundreds of millions of pounds.» Virgin specialises in the long-haul sector, which is expected to be LA TOUR South African Airways, Virgin Atlantic, United Airlines : Difficult times hardest hit by the pandemic. The airline had just £83m available in net cash according to its latest report, and leases 75 per cent of its 46 aircraft. Shares of United Airlines Holdings fell more than 6% on Wednesday after the airline turned to equity markets to raise $1 billion in additional capital. The sale provides much-needed added liquidity, but United is selling the stock at prices significantly below levels where it was buying the shares last year. Global aviation : 25 million jobs directly and indirectly at stake The International Transport Workers’Federation (ITF) and the International Air Transport Association (IATA) called for support from governments to the aviation industry, to protect jobs and ensure that air services can be maintained. The economic situation facing the aviation industry is severe. Air passenger demand is down 80%. Airlines are facing a liquidity crisis which threatens the viability of 25 million jobs directly and indirectly dependentupon aviation, including jobs in the tourism and hospitality sectors. In a joint statement on 20 April, ITF and IATA called for governments to: Ensure that the protection of health workers caring for those with COVID-19 is prioritized Coordinate carefully between each other and with industry to ensure harmonized and effective action to protect the safety of passengers and crew Provide immediate financial and regulatory support for airlines, in order to maintain the sustainability of terms and conditions for air transport workers Assist the industry to restart quickly by adapting regulations and lifting travel restrictions in a predictable and efficient manner IATA and ITF also noted the aviation industry’s contribution to helping alleviate the COVID-19 crisis by keeping supply chains open, and repatriating citizens. Aviation professionals are also volunteering on the front line to assist medical services in the fight against COVID-19. «Airlines are facing the most critical period in the history of commercial aviation. Some governments have stepped in to help, and we thank them. But much, much more is needed. Direct financial support is essential to maintain jobs and ensure airlines can remain viable businesses. And when the world is ready to start travelling again, the global economy will need aviation at its best to help restore connectivity, tourism and global supply chains. That will require a harmonized approach with industry, workers and governments working together,» said Alexandre de Juniac, IATA’s Director General and CEO. «IATA and ITF have a shared goal to ensure a sustainable future for the aviation industry. In order to achievethis, we need urgent action now. It is crucial that governments understand the importance of the aviation industry in rebuilding the global economy and support the industry. Bold decisions are required to invest in the future of airlines and protect the jobs and livelihoods of the transport workers who will lead the economic recovery when COVID-19 has been contained. Workers and the industry have joined forces, we invite more governments to join us in a coordinated approach to keep the industry and its essential supply chains moving,» said Stephen Cotton, ITF’s General Secretary. To recover from COVID-19, airports need a bailout too In regard to government aid during the COVID-19 crisis, Ilia Lioutov – Senior Manager of Economics and Policy at ACI World, says it would be very short-sighted to support only one actor in aviation. Airports have an equal role to play in the prospective recovery. The combination of trip cancellations and country-specific restrictions on international flights quickly amounted to a cost of roughly $1 trillion (US$), according to the industry estimates. The crisis produced a whole sequence of events that would have been unimaginable under normal circumstances. Even the ‘big guys’had no other way but to prematurely retire the ‘big birds’in a desperate attempt to scrape together whatever liquidity they were left with before the emergency brake. That is to say, a number of large airlines had to retire forever the four-engine passenger widebodies, namely Airbus A340, Airbus A380 and Boeing B747. Even the Great Recession of 2008 coupled with oil prices in summer 2018 as high as US$165 per barrel could not achieveit – the best testament to truly remarkable times for commercial aviation. As such, it is not surprising that McKinsey & Company in its COV- ID-19 briefing materials pointed to the fact that among 30 major industries, the two most severely affected by the health outbreak are commercial aerospace, and air and travel, with an estimated reduction of about 50 per cent in 2020. The airline industry, however, has a long history of volatility and financial difficulties. Rigas Doganis defines airlines as an «inherently unstable industry», mentioning that four to five years of global losses are typically followed by five to six years of profits. When the market is buoyant, you are incentivised to play it bold, otherwise you will lose your market share and the right momentum. Airports – the elephant in the room Bailing out airlines is inevitable. It is not only because of the ‘too big to fail’philosophy, but because of the objective role air connectivity plays today in the global economy. In simple terms, there is no choice but to get airlines back on track and re-establish the familiar flights grid we are accustomedto see. No doubt we need airlines to be back. But it will very short-sighted to pursue this selective, if not discriminatory, approach of supporting just one actor in aviation. Even though airlines are indeed the largest single component of the ecosystem, at least from a turnover perspective, they are by no means sufficient to ensure that the industry is able to recover after the COVID-19 shock. High degree of interdependency Aviation is characterised by a high degree of interdependency of all playersupon each other. Airports have an equal role to play in the prospective recovery. As such, pumping billions of dollars into airlines will not provide a balanced recovery. Imagine if airports are not able to cover the typical operating expenses – cost of insourced staff and contracted services, utilities, supplies, insurance and so on. Airports are not shopping malls with a couple of runways attached, they are sophisticated facilities and businesses in their own right and significant commercial players. Their business processes are equally dependent on liquidity and cost management, so eliminating airport charges is a utopian idea that will not get aviation anywhere. Both airlines and airports are equally dependent on the end-users of air transport – passengers and freight forwarders. As such, both players should have a strong motivation to help all parts of the sector to weather the crisis and path the best way to recovery. The prospective recovery should be a collective team effort, rather than a single play. 5

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