Pandemic grounds aviation icon Comair after decades of success
The airline group expects to be trading again, once operationally sound, towards the end of 2020
Comair, a SA aviation icon with a more than seven-decade record of grinding out annual profits, became the second high-profile private company to be floored by the Covid-19 outbreak.
Founded shortly after the end of World War 2 to offer chartered flights to some of the remotest places in Africa, Comair entered business rescue — a form of bankruptcy protection that allows a financially distressed company to delay creditors claims against it or its assets — on Tuesday.
“We completely understand and support the government’s reasons for implementing the lockdown, however as a result we have not been able to operate any flights,” CEO Wrenelle Stander said in a statement.
Comair, which has grown rapidly since winning a franchise licence to run British Airways flights in SA in 1996 and launching non-frills scheduled domestic flights under the kulula.com brand, was on track for its first annual losses after swinging into R564m losses in the first half as costs increases outstripped revenue growth.
Its woes, which included the unpaid R790m SAA owed the company as well as an order for Boeing planes that have since been grounded over safety concerns, deepened after President Cyril Rampahosa ordered a nationwide lockdown that prohibited air travel.
As about 1.5-million South Africans tiptoed back to work this week under the slightly relaxed phase of the home confinement order, airlines are unlikely to resume flights until at least October, Comair 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,” Stander said.
Comair is the second high-profile private company to tumble into business rescue after Edcon, one of the biggest names in SA clothing retail, voluntarily filed for the same protection from creditors to reorganise its business and work out if it can survive.
The company’s collapse into business rescue comes a week after an industry body group said the sector, which contributes about R180bn to SA’s economy and counts eight players, was teetering on the brink of collapse, and needed a special government support package to keep its members in business.
Stander is confident that Comair, whose shares were suspended on Tuesday, will emerge from the business rescue, saying the company remained “solvent”.
“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 county’s airline industry,” he said.
The company has appointed Shaun Collyer and Richard Ferguson as joint business rescue practitioners, who will oversee the restructuring of the company to work out if it can survive or if assets should be auctioned off to pay off creditors.
The process will build on the turnaround plan that Comair management was already implementing, which included cutting costs including via retrenchments and selling non-performing assets, Comair said.
Shares in Comair, which have plunged about 80% in the two years, traded at R1 before they were suspended, giving the company a market capitalisation of R469.3m.