Comair creditors and shareholders voted to adopt a business rescue plan on Friday, placing the troubled airline operator one step closer to recovery.
The rescue plan was adopted despite attempts by unions to derail the meeting. The National Union of Metalworkers of SA (Numsa), which is the majority union at Comair, had refused to attend a stakeholder meeting on Thursday to prepare for the Friday meeting during which the rescue plan was adopted, saying it was not adequately consulted on the choices presented by the rescue practitioners.
In terms of the rescue plan, up to 400 of the 2,200 employees will lose their jobs. However, unions will have to agree to this as stipulated on the long list of conditions to be met before the plan comes into force.
The preferred investment consortium, comprising a number of former Comair board members and executives, will invest fresh equity of R500m in return for a 99% shareholding once the various conditions set out in the plan have been met. Up to 15% of this will be allocated to a suitable broad-based BEE partner within 12 months, Comair said in a statement Friday.
The company said that during the next two months, R100m of this will be paid in two equal tranches as secured post-commencement finance. Additional funding from lenders of R1.4bn is required and will comprise R600m in new debt. The remaining R800m will be deferred debt, with capital payments deferred for a year and interest for six months.
Comair will be de-listed from the JSE and a new board constituted, the company said.
The Kulula operator was placed in business rescue at the beginning of May. It was facing multiple headwinds and headed for its first loss in more than seven decades after swinging R564m into the red in the first half of the year as cost increases outstripped revenue growth.
Its woes, which included the unpaid R790m SAA owes the company, as well as an order for Boeing planes that have since been grounded over safety concerns, deepened after President Cyril Ramaphosa ordered a nationwide lockdown that prohibited air travel as the government moved to curb the spread of the coronavirus.
According to the business rescue plan, the turnaround will focus on reducing operating costs and growing ancillary revenue. This will see the current workforce reduced from about 2,200 employees to 1,800 through voluntary retrenchment and early retirement programmes, as well as the section 189 retrenchment process that began prior to business rescue, the company said.
It is also envisaged that the fleet will be restored to 25 aircraft, including two Boeing MAX 737 aircraft. The aircraft will gradually return to service from December with a seven-month ramp-up period until June 2021.
Comair CEO Wrenelle Stander said entering business rescue had been a difficult decision, particularly as good progress was being made to fix the financial situation, however, the extraordinary circumstances of the lockdown meant the company was unable to earn any revenue.
“When the lockdown happened, business rescue became the only responsible course of action. Had we not made that tough decision Comair would not have flown again. There may still be a few bumps on the way ahead, however, now that the plan is adopted, at last clearer skies are now in sight.”
Richard Ferguson, one of the business rescue practitioners, said that a number of conditions in the plan must still be met, before it comes into force. If this does not happen, the company will be wound down in a structured manner to achieve the best return for creditors.
“That doesn’t diminish what an important moment this is for Comair, its employees, the investors and the SA flying public. After nearly six months of intensive work and negotiation in a fraught economic environment, it is an exceptionally positive result.”
Glenn Orsmond, speaking on behalf of the Comair Rescue Consortium, said the company plans to recommence air services in December with both the British Airways and Kulula brands.
Should everything go according to plan, the business rescue process should be concluded by March 31 2021, after which Comair will continue to operate as a sustainable business.
With Luyolo Mkentane
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