Comair, which owns local airline Kulula.com, has announced that it is entering business rescue as a result of the COVID-19 pandemic.
In a statement on Tuesday, Comair CEO Wrenelle Stander said the decision was taken to “safeguard the interests of the company and its stakeholders.”
Like most airlines, Kulula.com has not been in operation since 26 March following the government’s announcement of travel bans and a nationwide lockdown.
‘Flights likely to be grounded until October’
Comair reported a half-year loss of R564 million in its 2019/20 financial year and announced a restructuring process in March just before the lockdown was implemented.
Stander said, “While we had started making good progress to fix the financial situation six months ago, the crisis has meant we have not been able to implement it as we intended.
“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. Now that the phased lockdown has been extended the grounding is likely to endure until October or even November.
“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.”
Suspension of trading on JSE
Comair has appointed Shaun Collyer and Richard Ferguson as the joint business rescue practitioners as from 5 May, 2020. It has also been granted approval to suspend trading on the Johannesburg Stock Exchange.
Stander added, “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 county’s airline industry.”
The business rescue practitioners will continue with the restructuring process that was already underway, including a Section 189 process which is expected to affect about 200 workers.
The global aviation industry has been one of the hardest hit since the pandemic broke out in China December last year. The crisis has exacerbated the woes of already struggling local airlines.
Last week, the government announced plans to establish a new national airline from the ruins of the ailing South African Airways (SAA), which has been under a business rescue process since December.
SAA’s subsidiary, SA Express, is also having difficulties paying its workers’ salaries. Its business rescue practitioners have applied for provisional liquidation of the airline after government funding dried up.