Comair to file for business rescue as turnaround plan stalls
Comair, which operates Kulula and British Airways, said that it had been granted approval to suspend trading on the JSE with immediate effect because the Covid-19 pandemic had disrupted the implementation of a turnaround plan.
Chief executive Wrenelle Stander said the company had faced an unprecedented situation following the Covid-19 lockdown.
Stander said Comair had to abandon a turnaround strategy it implemented six months ago to fix the financial situation because Covid-19 meant it could not be implemented as planned.
She said although Comair understood and supported the government’s reasons for implementing the lockdown, it had not been able to operate any flights.
“Now that the phased lockdown has been extended, the grounding is likely to endure until October or even November,” Stander said.
“These extraordinary circumstances have completely eroded our revenue base, while we are still obliged to meet fixed overhead costs. The only responsible decision is to apply for business rescue.”
In February, Comair reported a half-year loss of R564million for the six months to December, despite growing its revenue 3percent.
The group said the revenue growth was not enough to offset the 14percent cost increases from the significantly higher fleet and maintenance costs. Comair grounded its flights on March 26, when the lockdown was implemented, and has not operated any passenger services since.
Stander said although Comair remained solvent, the business rescue process was meant to turn it around.
“Comair remains solvent and an important contributor to the South African economy.
“This is a necessary process to ensure a focused restructuring of the company takes place as quickly as possible, so we can take to the skies again as a sustainable business and play our part in the country’s airline industry,” said Stander.
Comair said it had appointed Shaun Collyer and Richard Ferguson as joint business rescue practitioners.
The aviation company said the two would provide shareholders and all other stakeholders with further updates throughout the process.
It said that the business rescue process would build on the turnaround plan that Comair management had already implemented, aimed at preserving cash, cutting costs, disposing of non-performing assets, and strengthening the balance sheet.
Comair said that the Section 189A consultative process, which was part of this plan and that began on March 23, would continue.
Stander said Comair would resume its operations in accordance with government directives and would continue to engage with the government to accelerate the opening of the airline industry.
“The health and welfare of our customers, crew, and the public is the overriding priority, and we will only operate when we are sure we can do so safely.”
She said customers with bookings would be able to rebook flights within 12 months of their departure date, adding there would be no charge for any changes made before November.
“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.