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Embattled Comair will be moving out of its business rescue status into liquidation proceedings.
This comes after the company’s business rescue practitioners (BRP) lodged a court application on Thursday, to change the status to liquidation proceedings.
The application was lodged because additional funding could not be secured to save the ailing airline.
In a note on Thursday, BRPs advised creditors that it was no longer useful to save Comair.
Comair has been flying in South Africa since 1946 and has been in business rescue for the past two years.
“The Comair situation is extremely sad, and I empathise with all its employees who now face renewed and heightened uncertainty. As we saw from other recent airline failures, the local aviation industry was already distressed pre-Covid, and today it faces new threats and challenges, not least of which are the inflationary costs being driven by the Russia-Ukraine war. Although Comair’s market share was substantial, at about 40 percent, the remaining local airlines will quickly fill this market gap. Comair was a formidable competitor and I am certain many of its employees will find new homes in the other carriers as they in turn expand. In the meantime, Airlink is supporting approximately 25,000 affected holders of tickets for Comair’s British Airways flights and will be helping them reach their destinations at no additional charge,” said Airlink CEO and Managing Director, Rodger Foster.
In a brief statement on social media platforms last week, Comair, which operates British Airways and kulula.com, advised the public that its flights had been voluntarily suspended from June 1 pending securing funding to resume operations.
The National Union of Metalworkers of South Africa (Numsa) said it is deeply concerned for the troubled airline company, Comair, and its workers.
This was after Numsa’s meeting with the management team of Comair, including the CEO, Glenn Orsmond, and the company’s Business Rescue Practitioner, Richard Ferguson earlier this week.
Numsa said it is deeply concerned about the state of the company and in particular, what this means for workers and their families.
“At least 1200 jobs are on the line if this airline collapses. We maintain that this situation is caused by mismanagement at the highest level. Both Glenn Orsmond and Ferguson must take full responsibility for failing to turn the airline around. The airline has been under business rescue for possibly the longest time in South African history but Richard Ferguson failed to implement a strategy to keep the business viable,” Numsa further stated.
Numsa said it would be making an application to the Department of Employment and Labour for employees to be placed on the Training Lay-off Scheme.
“That way whilst the airline is not operating, workers can at least earn some kind of salary while training. At the same time, every effort must be made to find an investor for the airline in order to prevent liquidation,” Numsa further said.
Ferguson, says with its two airline brands, market share, modern aircraft fleet, experienced employees, sales and distributions channels Comair was an inherently viable business.
“Unfortunately, though, despite their best efforts the BRPs had been unable to secure the capital required for the airline to recommence operations. We did our utmost to secure the funding, but when we were unable to do so had no option to lodge the application. It is an extremely sad day for the company, its employees, its customers and South African aviation,” he further said.
After entering business rescue, Comair was able to start flying again when the Comair Rescue Consortium (CRC) invested R500m for a 99% share of the equity in the company at the time.
Although the amounts indicated by the business rescue plan were invested, the Company unfortunately faced unforeseen headwinds including three further Covid-related air travel lockdowns inter alia the “Red Listing” of South Africa by certain European countries, notably the United Kingdom, the suspension of the Company’s AOC in March 2022 by the regulator as well as significantly high fuel prices experienced in the past five months.
Each of these events had a material negative impact on the business.
The CRC were only able to finance the impact of these events up to a certain point.
The BRPs ongoing requests to the CRC to provide a plan to raise the further funding necessary to absorb the balance of these and other future potential economic shocks were not successful.
In the circumstances, the BRPs approached other lenders to raise the funding required.
“Regrettably when this funding could not be secured before the existing funding was exhausted, scheduled flight operations were suspended on 31 May 2022. Comair’s BRPs continued the process to secure additional funding from other sources but despite several parties expressing interest, they were unable to secure sufficient substantive commitment.”
Ferguson said that the company’s employees and customers who held bookings or were owed refunds will now become creditors of the Company.
BUSINESS REPORT
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