Business rescue plan calls for Comair to be downsized and delisted
ENGINEERING NEWS / 03 SEPTEMBER 2020 - 15.44 / REBECCA CAMPBELL - CREAMER MEDIA SENIOR DEPUTY EDITOR
A business rescue plan for South African private-sector airline group Comair has been published and the group’s creditors have until September 18 to examine and decide whether or not to support the plan. Comair operated the British Airways in South Africa and Kulula low cost carrier brands and entered business rescue in early May.
The business plan was developed after negotiations with a preferred investor. Part of the plan involves the delisting of Comair from the JSE. The plan also includes the retention of the group’s existing relationships with Boeing, British Airways and Discovery Vitality.
Under the plan, the preferred investor will make a new investment of R500-million in Comair, obtaining a 99% shareholding in return. Within 12 months, a suitable broad-based black economic empowerment partner would be allocated up to 15% of this shareholding. Of the new investment, R100-million would be paid in two equal instalments, the first this month and the second next month, and this amount would act as secure post-commencement finance.
“Additional funding from lenders of R1.4-billion is required in order to successfully implement the adopted plan,” stated Comair in its press release. “This will comprise R600-million in net new debt. Existing debt will be deferred to provide the remaining R800-million, with capital payments deferred for 12 months and interest for six months.”
The turnaround plan was centred on containing operating costs and increasing ancillary revenues. Consequently, the Comair workforce would be reduced from some 2 200 to 1 800, by means of early retirement and voluntary retrenchment, as well as by the continuing of the (Labour Relations Act) Section 189 retrenchment process initiated by the group before it entered business rescue.
Comair’s fleet would also be reduced. Prior to entering business rescue, the group operated 26 aircraft, all of them versions of the Boeing 737. Of these, 13 were owned by Comair, comprising ten 737-800s and three 737-400s. The remaining 13, all 737-800s, were leased. In addition, the group had taken delivery of one 737 MAX 8, with a second completed in the US, but both unflyable because of the global grounding of the type. Under the business rescue plan, Comair would have a fleet of 20 737s, composed of 17 737-800s and the three 737-400s. The number of leased aircraft would be reduced, thereby reducing exposure to currency exchange rate risk.
“It is important to understand that what happened to Comair was the result of an eco-system problem that has seen some 600 airlines around the world cease to operate,” stressed a Comair business rescue practitioner, Richard Ferguson. “It was not something that was business specific. Comair is a national asset. Getting it back in the air will save 1 800 jobs, provide the flying public with more choice and competitive fares, strengthen the aviation sector and contribute to the broader South African economy.”
Should the business rescue plan be approved, Comair’s aircraft would be returned to service in a phased process starting in December and continuing until June next year. The business rescue process itself should be concluded by the end of March at the latest. Thereafter the group would be able to operate as a sustainable business.
Disclaimer - The views expressed here are not necessarily those of the BEE CHAMBER