Velvet Sky crashes to Earth

2012-05-12 00:00

MORE “Velvet Pie in the Sky”.

This was how an advocate described a last-ditch attempt by low-cost airline Velvet Sky to stay aloft yesterday, citing a another possible business rescue plan involving the Malawi government.

But Judge Shyam Gyanda granted an order placing the airline under provisional liquidation.

He said that in his view there was no hope of rescuing the airline, which admitted it has no assets or capital.

The judge said any potential investor “worth his salt” ought to know that Velvet Sky’s employees have not been paid for three months, their aircraft have not been in the air since February 27 and their offices have been closed for the past three to four weeks.

Advocate Anna Annandale SC, who appeared for Velvet Sky’s major creditor, BP Southern Africa, pointed out in her argument that Velvet Sky has not even explained what became of its previous business rescue plan proposed by creditor Umzamo Transport. The proposal contained similar “empty promises” about unidentified foreign investors and negotiations with other African airlines, other than Malawi, she said.

Judge Gyanda agreed with her submission that the latest application was “just another ploy to delay proceedings” as no papers were placed before the court to support it.

He said that if he agreed to postpone the provisional liquidation order again it would create a false impression with potential investors that the court believed the latest proposal was viable.

It would also simply “prolong the agony” of the company’s employees who have not been paid for over three months, he said.

Advocate Mergen Chetty, representing Velvet Sky, earlier pleaded with the court to grant the troubled airline time to file court papers setting out a new business rescue proposal involving Malawi.

The negotiations had reached the signing stage when President Bingu waMutharika died, he said. The new president now had to ratify the agreement.

Chetty said this would be done by June 15, but if a provisional liquidation order was granted it would scupper any negotiations with Malawi and Velvet Sky would be finally “dead and buried”.

The court also heard a plea on behalf of Velvet Sky’s employees, by their flight operations manager, Dennis Paul Green, who told the court that the employees of the airline were in favour of any rescue plan that might save their jobs, especially in the present economic climate.

Green said the employees were not members of any formal union or staff association.

Advocate Abdul Khan, representing another creditor, Up North Investments, who are owed R1,5 million by Velvet Sky, said if the airline was provisionally liquidated creditors would not get their money back as there are no assets. For that reason his client, too, was in favour of any proposed business rescue plan.

In his judgment, Judge Gyanda said the court sympathised with Velvet Sky’s employees and creditors, but it would serve no purpose to put off granting the provisional liquidation order as this would only prolong their agony.

In March Velvet Sky CEO Dhevan Pillay admitted that the airline had debts totalling more than R100 million, but said they were hopeful of turning the airline around with foreign aid. The proposed investor was never publicly identified.


The Mail and Guardian previously reported on the emergence of people associated with the Aurora mining debacle as key players in the period before the airline went down.

Court papers revealed that Suliman “Solly” Bhana served as a contact person for creditors and that Bashir Moosa and Tony Chammas were described respectively as the chief financial officer and a “financial manager” of Velvet Sky.

Solly Bhana and his son, Fazel, also emerged as “consultants” to Aurora Empowerment Systems during the company’s controversial management of the liquidated Pamodzi gold mines.

Since August last year Fazel Bhana has also been active as a consultant to Velvet Sky.

Moosa, a business partner of the Bhanas, served as Aurora’s financial manager, while Chammas was also described as such.

Sapa reported that the attorney who originally represented Velvet Sky in the liquidation application, Ahmed Amod withdrew from the case for personal reasons. Amod said he was still a director of the airline. He is also a lawyer for Aurora Empowerment Systems.

Aurora’s management contract was cancelled after the company was accused of destroying infrastructure at the mines.

Over 5 000 people lost their jobs at the mine, which had been stripped of its assets.

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