Comair’s business rescue plan expected to land on June 9
The embattled airline’s assets exceed its liabilities, and there is a reasonable chance of rescuing it, the group’s business rescue practitioners say
The business rescue practitioners for embattled airline Comair expect to publish a rescue plan in three weeks , saying there is a reasonable chance of rescuing the business given its asset base and its importance in terms of SA’s travel infrastructure.
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 May 5. It is one of a number of companies including Edcon that have filed for business rescue in recent months.
Comair has appointed Shaun Collyer and Richard Ferguson as joint business rescue practitioners. They held their first formal meeting with creditors and employees on Tuesday. The business rescue plan will probably be published on June 9, and a shareholder vote to approve it will take place on June 24, the practitioners 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, swung into a R564m loss in the first half of its financial year as cost increases outstripped revenue growth.
Its woes included R790m that was unrecoverable after SAA entered business rescue in early December 2019. The money was for outstanding payments on a R1.1bn settlement of a Competition Commission complaint, said Collyer.
Comair had assets of R7.42bn on its balance sheet compared with liabilities of R5.48bn, and was not insolvent, but rather financially distressed because there was insufficient cash to pay ongoing costs and obligations and, with its flights grounded for an uncertain period, no opportunity to generate revenue, the practitioners said.
Collyer said Comair was important to SA’s infrastructure, had good standing in the eyes of the public, and was competitively well placed, having enjoyed a 39% market share for domestic travel, the statement read. Due to this, there are “reasonable prospects for Comair to be rescued through business rescue proceedings”.
The business rescue practitioners 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. They are receiving claims from creditors, and the next step in the business rescue process is the formation of a creditors’ committee and an employee representatives’ committee.
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