Kulula.com owner Comair goes into business rescue

Comair announced on Tuesday that it is unable to operate given the current coronavirus restrictions in place and its board decided the best option to ensure the long-term survival of the company is to implement a business rescue plan.

Shaun Collyer and Richard Ferguson have been appointed as the joint business rescue practitioners.

Comair, the owner of kulula.com and the local operator for British Airways, had said in a cautionary note on 30 April that it expected to only resume operations in either October or November.

The airline has not been in operation since March 17 due to coronavirus curbing flight bans.

Under the state’s plans to gradually reopen the economy, restricted air travel will only commence at Level 3, full domestic air travel at Level 2 and regional and international air travel at Level 1.

‘Extraordinary circumstances’

Comair CEO Wrenelle Stander said in a statement on Tuesday that the company, which reported a half-year loss of R564 million for the first half of 2020, had started making good progress to fix the financial situation six months ago, but the pandemic has meant it was not able to implement what was intended.

“These extraordinary circumstances have completely eroded the company’s revenue base while it is still obliged to meet fixed overhead costs. The only responsible decision is to apply for business rescue,” said Stander.

Customers with existing bookings will be able to rebook flights within 12 months of their departure date. There will be no charge for any changes made before 1 November 2020.

“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.

The union Solidarity, which has more than 200 members at Comair, said it is committed to working with the company and other stakeholders in an effort to return Comair “to a champion of the South African skies” and ensure that its members jobs are protected.

“Solidarity note the intentions of Comair to continue with its retrenchment plan under the facilitation of the CCMA [Commission for Conciliation, Mediation and Arbitration], but will expect that the business practitioners appointed will provide a comprehensive business plan to support a sustainable turnaround prior to any job losses,” said Jannem Goussard, Solidarity’s organiser for aviation and defence.

Special aid 

JSE-listed Comair has been lobbying the state for “special aid” through industry initiatives, it said on Tuesday. Government, through the Department of Public Enterprises, is currently scrambling to secure the future of flag carrier South African Airways, which has been under business rescue since December last year.

Comair said late in April that it had asked staff to either take leave or unpaid leave for the extended lockdown period, as it could not afford to pay employees their full salaries.

It announced towards the end of March – just ahead of the national lockdown and flight bans – that it had begun a restructuring process to improve efficiency and financial sustainability. This after the business reported a half-year loss of R564 million for the six-months ending December 2019. Although it reported a 3{e93887a69cdd95d753f466db084bbc3aa0067124675315461d28d68a72842cc2} growth in revenue, this was not enough to sustain additional costs of 14{e93887a69cdd95d753f466db084bbc3aa0067124675315461d28d68a72842cc2}, the group previously said.