Comair up in the air over outstanding R790m SAA payment
The operator of kulula.com vows to claim the entire settlement amount despite SAA's financial woes
Comair on Wednesday said it was uncertain if cash-strapped SAA would pay the outstanding payments in terms of a settlement agreement between the two companies.
The listed operator of low-cost airline kulula.com and British Airways (BA) in SA and SAA reached an agreement in February 2019 which required the state-owned airline to pay Comair R1.1bn as part of a settlement agreement. The deal put an end to a long-standing dispute over SAA’s alleged anticompetitive conduct.
Comair had complained to the Competition Commission that SAA paid travel agents to divert customers to its flights from 2001 to 2006.
Comair said in its 2019 annual report that SAA had made an initial payment of R389m on February 28 2019, with the balance payable in regular instalments until July 28 2022.
However, the arrangement took another turn when the struggling SAA was placed in voluntary business rescue in December 2019. The Companies Act puts a moratorium on creditor claims against a company in business rescue.
Business rescue is aimed at rehabilitating a financially distressed company by restructuring its affairs, including debt.
Comair, which expects to report a loss in the six months to end-December, on Wednesday said SAA had breached the terms of the settlement agreement “and that the full outstanding settlement amount of R790m as at 31 December 2019 became due in terms of the agreement”.
But the company said it was uncertain if it could recover the amount from SAA. The future of the airline remains unclear, with business rescue practitioners Les Matuson and Siviwe Dongwana expected to table a business rescue plan before the end of February.
Comair said that as at June 30 2019 it had recorded a loss allowance — which is the amount Comair thought it could lose because of non-payment — of R285m against the SAA claim. But following the business rescue proceedings, the company’s board decided to increase the loss allowance just six months later by R505m to R790m, which is the full outstanding settlement amount.
“Regardless of the increase in the loss allowance provision as detailed above, Comair still intends to aggressively pursue the full outstanding settlement amount owed by SAA and will explore all options available to reclaim the full amount owing,” the company said.
Comair said it expected earnings per share and headline earnings per share in the six months to end-December to fall by between 534% and 554%. The company said it expected to report a loss per share and headline loss per share of between 118c and 123c per share.
Comair shares gained 2.94% to R2.80 on Wednesday.