Comair to be liquidated after failing to secure funding
Comair’s business rescue practitioners on Thursday, June 9, 2022 lodged a court application to activate liquidation proceedings for the 76 Year old South African Airline after failure to secure much needed capital required to keep the carrier afloat.
One of the BRPs, Richard Ferguson, says with its two airline brands – British Airways, operated by Comair and kulula.com, 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.”
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.
INDUSTRY REACTIONS
“AASA notes with sadness the Comair liquidation announcement. Our thoughts are with all of the airline’s staff and customers. At the same time, it should be noted that this takes place against a domestic and regional market which is making a robust recovery and characterised by healthy competition.”
“By the end of May, the Southern African market had recovered to 27.7 percent below 2019 capacity levels. At the same time last year we were still 50.4% below pre-pandemic levels,” said Aaron Munetsi, CEO of AASA
“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.
