Kulula.com owner Comair goes into business rescue

Comair announced on Tuesday that it is unable to operate given the current coronavirus restrictions in place and its board decided the best option to ensure the long-term survival of the company is to implement a business rescue plan.

Shaun Collyer and Richard Ferguson have been appointed as the joint business rescue practitioners.

Comair, the owner of kulula.com and the local operator for British Airways, had said in a cautionary note on 30 April that it expected to only resume operations in either October or November.

The airline has not been in operation since March 17 due to coronavirus curbing flight bans.

Under the state’s plans to gradually reopen the economy, restricted air travel will only commence at Level 3, full domestic air travel at Level 2 and regional and international air travel at Level 1.

'Extraordinary circumstances'

Comair CEO Wrenelle Stander said in a statement on Tuesday that the company, which reported a half-year loss of R564 million for the first half of 2020, had started making good progress to fix the financial situation six months ago, but the pandemic has meant it was not able to implement what was intended.

"These extraordinary circumstances have completely eroded the company's revenue base while it is still obliged to meet fixed overhead costs. The only responsible decision is to apply for business rescue," said Stander.

Customers with existing bookings will be able to rebook flights within 12 months of their departure date. There will be no charge for any changes made before 1 November 2020.

"Through this process we intend to right-size our operations to be more efficient, agile and customer-centric. This includes, but is not limited to, reconfiguring our network and fleet mix, reviewing portfolios and joint ventures, increased digitisation of the business and new product development and delivery," said Stander.

The union Solidarity, which has more than 200 members at Comair, said it is committed to working with the company and other stakeholders in an effort to return Comair "to a champion of the South African skies" and ensure that its members jobs are protected.

"Solidarity notes the intentions of Comair to continue with its retrenchment plan under the facilitation of the CCMA [Commission for Conciliation, Mediation and Arbitration], but will expect that the business practitioners appointed will provide a comprehensive business plan to support a sustainable turnaround prior to any job losses," said Jannem Goussard, Solidarity's organiser for aviation and defence.

Special aid 

JSE-listed Comair has been lobbying the state for "special aid" through industry initiatives, it said on Tuesday. Government, through the Department of Public Enterprises, is currently scrambling to secure the future of flag carrier South African Airways, which has been under business rescue since December last year.

Comair said late in April that it had asked staff to either take leave or unpaid leave for the extended lockdown period, as it could not afford to pay employees their full salaries.

It announced towards the end of March - just ahead of the national lockdown and flight bans - that it had begun a restructuring process to improve efficiency and financial sustainability. This after the business reported a half-year loss of R564 million for the six-months ending December 2019. Although it reported a 3% growth in revenue, this was not enough to sustain additional costs of 14%, the group previously said.

According to aviation expert Desmond Latham, says it's a critical moment for aviation and Comair unfortunately does not have cash reserves to see it through these difficult Covid-19 infected months.

"They've been badly hurt by a number of factors on top of collapse of passenger-based commercial aviation. The 737MAX 8 payments are in dollars and the rand had slipped from R14.70 odd in November 2019 to R18.56 today [Tuesday]," sayd Latham.

"They have started a retrenchment process by continuing with their 189A retrenchment process which will help but they really need an infusion of cash."

Update: The National Union of Metalworkers of SA (Numsa) is "shocked and dismayed" at Comair going into business rescue, according to a statement by its general secretary Irvin Jim issued on Wednesday.

The union and its members had to hear about it in the media instead of it having been communicated to them before hand, according to the statement.

"This announcement was made against the backdrop of looming retrenchments after the airline served us with section 189 in March. We have not yet met for the first consultation on this because of the lockdown, and we are still waiting for CCMA to confirm a date," says Jim.

"We are expecting to meet with the management soon to get more details on how this process will affect operations. We remain committed as always to doing everything possible to save as many jobs as we can."

Numsa spokesperson Phakamile Hlubi-Majola claims Comair CEO Wrenelle Stander "decided to communicate to the media first, without informing employees or informing Numsa". In her view this was "insensitive" on the part of the airline leadership.

Comair denies this allegation, saying that, as a JSE-listed company, the airline is required to issue a Stock Exchange News Service (SENS) announcement about major developments affecting the business and did so in conjunction with an announcement to employees and a media statement.

"Comair will continue to communicate with its employees, unionised or not, throughout the business rescue process," the airline responded to Fin24.

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