South Africa’s Comair stands ‘reasonable’ chance of survival

There is a reasonable chance of rescuing Comair Group given its asset base and importance to South Africa’s connectivity, according to the business rescue practitioners who were appointed to the company earlier this month.

Shaun Collyer and Richard Ferguson said that the group was not factually insolvent and has assets of ZAR7.4 billion ($407 million) versus ZAR5.5 billion of liabilities. However, the business is “financially distressed” because there is insufficient cash to pay ongoing costs and no way of generating revenues given the COVID-19 crisis.

Comair, which operates LCC kulula.com and franchise flights for British Airways, halted service on March 26 as part of national efforts to control the spread of coronavirus.

The company filed for business rescue on May 5 after it emerged that the government planned to lift lockdown measures in phases and domestic flights could be grounded until October or November. Comair CEO Wrenelle Stander said the move was the “only responsible decision” available.

“Through this process, we intend to right-size our operations to be more efficient, agile and customer-centric,” she added at the time. This includes reconfiguring its network and fleet mix.

During the first formal meeting since Comair entered business rescue, Collyer said there were “reasonable prospects” the group could survive thanks to the fact its assets exceed its liabilities and the “critical infrastructure” it provides for South Africa along with the “immense goodwill” with the public and customers.

According to an analysis of data provided by OAG Schedules Analyser, kulula.com offered 4.05 million seats across almost 21,500 flights in 2019, with all of its capacity deployed on domestic routes. In its role as a British Airways franchisee, Comair provided another 3.36 million domestic seats during the year.

Kulula.com offered service from six South African airports in 2019, operating more than 1.1 million seats (28.2% of its capacity) and 6,000 flight departures from Johannesburg O.R. Tambo (JNB). It also served Cape Town (CPT), Johannesburg Lanseria (HLA), Durban (DUR), George (GRJ) and East London (ELS).

As a British Airways franchisee, Comair offered 1.36 million domestic seats from JNB and 913,844 from CPT. The airline also served DUR and Port Elizabeth (PLZ), providing 657,408 and 433,784 domestic departure seats respectively.

The OAG data shows that kulula.com provided 53.3% of all domestic departure seats from HLA in 2019 and 44.9% from GRJ. BA provided 36.5% from PLZ.

State flag carrier South African Airways is currently under the same bankruptcy protection process as Comair, while SA Express is being liquidated.