Velvet Sky grounded

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Low cost carrier Velvet Sky has halted all flights for a week as it tries to resolve problems with creditors. Flights were delayed and cancelled last week when the airline struggled to pay its maintenance and fuel bills.

“As a result of recent events, the negative impact on business, and adverse publicity, Excalibur Aerospace wishes to announce a suspension of all its Velvet Sky flights, from Monday February 27th until Monday March 5th 2012,” the company announced yesterday.
“The suspension will allow the company time to reconstitute its board, and balance sheet, and realign its short-term strategy. It will also allow the company time to properly resolve the disputes with certain suppliers,” the statement said.

Velvet Sky flights were delayed on Wednesday, cancelled on Thursday and delayed again on Friday.

On Friday Velvet Sky was given until March 5 to respond to an application brought before the Pietermaritzburg High Court by BP Southern Africa to provisionally liquidate the carrier due to the non-payment of fuel. Velvet Sky allegedly owes BP R29 million for aviation fuel. BP’s counsel Gerrie Roberts SC said the airline had broken its promise to pay arrears by February 17 and had not kept up to date with current fuel payments.

Last week BP spokeswoman Glenda Zvenyika said company had begun liquidation proceedings against Velvet Sky over money owed for fuel. BP suspended fuel supplies to Velvet Sky last month due to non-payment.
“We got off to a good start on Monday. Unfortunately, we had to cancel flights due to the unavailability of fuel,” said Velvet Sky operations chief Gary Webb.

At the same time Velvet Sky is engaged in a financial dispute with SAA Technical, which maintains its aircraft. Webb said that delays “were mainly as a result of commercial issues that have arisen between Velvet Sky Aviation and a service provider [SAA Technical]. We are in dispute with them, but we are…changing service providers.”

On Sunday Velvet Sky said it had made some changes to a number of service providers, to ensure that passengers and the company were “not in the hands of people we can not depend on”.

Solomon Makgale, spokesman for the Airports Company of South Africa (Acsa), said that the Airports Company of South Africa (Acsa) was also owed money by Velvet Sky, but had entered into a payment arrangement, which had been honoured.

The carrier yesterday said that customers holding reservations for this week may choose to change their bookings to a later date, or apply for a refund.

In spite of its problems, Velvet Sky remains upbeat. “The Chairman and Board is confident that the long-term outlook for Velvet Sky is positive, and that developments currently under discussion will significantly improve the company’s position,” the airline said.

Velvet Sky launched on March 22 last year with an inaugural flight between OR Tambo International and King Shaka International. The carrier’s main route is the ‘golden triangle’ between Johannesburg, Durban and Cape Town. This route is already served by all of South Africa’s biggest existing airlines, including Kulula.com, Mango, 1Time, South African Express, South African Airlink and British Airways.

Velvet Sky was sold to Excalibur Aerospace by parent company Macdonald Holdings only three months after the airline first took to the skies.

In August last year Velvet Sky leased two more Boeing 737s, in addition to its DC-9 and first 737. Velvet Sky said it had a bumper festive season, enjoyed high load capacities and aimed to open up new routes in Africa.

However, domestic airlines have been facing tough times recently – Comair, which operates British Airways and Kulula.com in southern Africa, posted a loss for the second half of last year. The company cited a 24% increase in operating costs, mainly driven by the highest average fuel price seen to date. Other factors that resulted in the loss included the weak economic climate and 70% rise in airport tariffs.

Comair said that prevailing high oil prices and a weak global economy prevailing into the foreseeable future will result in a tough environment for airlines. “Airlines that do not substantially reinvent themselves will not survive in this new environment, as demonstrated by the failure of a number of airlines globally in the first weeks of 2012,” the group warned.
“The weak economy and poor consumer spend, high oil prices, excessive Acsa charges, a weakening local currency and increased competition, all threaten the growth of local air travel. Worldwide, the airline industry has been forced to recognise the need for radical change to ensure sustainability and profitability,” said Comair’s CEO Erik Venter at the end of January.



Pic: Mark D Young.