South Africa’s Comair seeks new financial support

Comair (South Africa) (MN, Johannesburg O.R. Tambo) needs new financial support from the Comair Rescue Consortium (CRC) as the company cannot generate any revenue with its fleet grounded until at least August 31, 2021, due to an extended COVID-19 lockdown in South Africa.

In a notice to shareholders, Comair’s administrators said the undisclosed additional funding was necessary to ensure that Comair could meet its financial obligations in the foreseeable future. The company’s executive management would shortly present a proposal to the administrators and the consortium. In the interim, the administrators had put in place measures to preserve the company’s available funds. The airline is still under administration after restarting services in December 2020.

The CRC consortium, consisting of former Comair directors and executives, last year injected ZAR500 million rand (USD34 million) of capital to rescue the 75-year-old private airline from bankruptcy. However, due to the current COVID-forced lockdown, a previous undertaking by the CRC’s members to fund Comair “as and when required” was no longer applicable. Accordingly, a new undertaking was required to provide the necessary funding, said administrators Richard Ferguson and Neil Hablutzel.

They said Comair’s fleet of aircraft had been placed in short-term preservation maintenance storage pending the resumption of scheduled flights. The company consequently was unable to generate any revenue. They pointed out it was their ongoing obligation in terms of South Africa’s Companies Act to “continuously consider whether there is a reasonable prospect to rescue the company, and the CRC’s support is pivotal to that consideration”.

Comair, on July 13, announced it was forced to extend the suspension of all scheduled Kulula Air and British Airways franchise flights until August 31, 2021, following an announcement by South Africa’s President Cyril Ramaphosa that the country would remain in a stricter lockdown for at least another two weeks until July 25, 2021.

The company had suspended all flights on July 5 with the intention to resume operations from July 30. This came after authorities banned leisure travel to and from Gauteng, the most populated province, which includes Johannesburg, which has been hardest hit by a “third wave “of COVID-19 gripping the country.

“Given the uncertainty of the expected length of the recently adjusted lockdown, restriction of travel in and out of Gauteng, coupled with the rampant transmissibility of the COVID-19 “Delta” variant, Comair had to make a difficult but responsible decision to further suspend flight operations until August 31, 2021,” the airline said in a statement. “This decision has been taken in the interest of the well-being of employees and customers. Without government engagement with or support for the aviation sector and associated services, the ability to plan constructively for a meaningful service beyond July 30, 2021, is exceptionally challenging. Taking the potential variables into consideration, Comair plans to resume scheduled operations on Wednesday, September 1, 2021,” it added.

Meanwhile, the administrators, together with the CRC investors’ consortium and the executive management team, had repudiated or contractually terminated certain “onerous obligations and agreements” that had commenced before the airline went into business rescue last year, according to the notice to shareholders.

The administrators said they had also instructed lawyers in the United States to proceed with legal proceedings to protect Comair’s interests. As reported, this relates to Comair being granted immunity under the US Chapter 15 Bankruptcy Code in its negotiations with Boeing over the airline’s decision to cancel its contract for eight B737-8s.

Meanwhile, adjudication of creditors’ claims has been completed, contact has been made with some creditors, and all will be notified in due course of the result of their claims, the administrators said.

Comair was delisted from the Johannesburg Stock Exchange (JSE) on April 7, 2021, which gave it access to ZAR100 million rand (USD6.8 million) under the COVID-19 Loan Guarantee Scheme put in place between the South African Reserve Bank and large commercial banks. The loan formed part of planned debt funding as set out in the airline’s business rescue plan. In terms of this, Comair’s investors applied to commercial lenders for new net debt funding totalling ZAR600 million (USD41 million), of which ZAR500 million (USD34 million) had been drawn down by April 2021.

Comair Chief Executive Officer Glenn Orsmond, meanwhile, welcomed the impending roll-out from July 15 of vaccine registration for the 35-49-year-old group as a crucial step towards ensuring the safety of customers and employees, as well as stimulating demand and the recovery of the economy and tourism industry. “We anticipate the vaccine roll-out picking up pace in earnest and hope to see it reaching critical mass in the next month or two,” he said.