The largest union at Comair, which has been scrambling for cash since at least January to make up for losses caused by the Omicron-induced travel bans, says it will meet the airline’s management team on Thursday amid fears of job losses after the company indefinitely grounded all flights.
Comair, which operates British Airways and Kulula flights in SA and is a key regional operator accounting for 40% of airline capacity, announced on Tuesday night that it has been forced to suspend all its flights with immediate effect due to a lack of funding.
This left thousands of passengers stranded, costing the airline revenue at a time when it was looking to accelerate its recovery, prompting the National Union of Metalworkers of SA (Numsa) to seek a meeting with management.
“Numsa is very concerned about what is happening at Comair and job security. We are meeting management tomorrow in order to get more information,” Numsa spokesperson Phakamile Hlubi-Majola said on Wednesday. Comair employs 2,000 workers.
The indefinite suspension of operations — coming about two months after Comair’s fleet was grounded for almost a week by the country’s aviation regulator due to safety concerns — risks causing enormous reputational damage.
It will almost certainly stall the recovery of Comair, a company that was once the shining beacon of SA’s aviation industry, going more than seven decades without making a loss. It has struggled to completely emerge from business rescue after tumbling into the form of bankruptcy protection alongside many other airlines when the world was in the throes of Covid-19 travel restrictions.
Its new owners — including former Comair directors Martin Moritz, Pieter van Hoven and Rodney Sacks, and an investment vehicle, Luthier Capital — have been on the hunt for funding since January to make up for about a R100m loss in revenue arising from travel bans in the wake of the discovery of the Omicron variant. But so far the company has been unable to secure all the required funding.
Under the approved business rescue plan, the new owners agreed to inject R500m into the group in return for virtually all of the company. Additional funding of R1.4bn, comprising R600m in new borrowing and R800m in deferred debt, was due to be secured from banks for this plan to be carried out.
This week, the company’s business rescue practitioners said that the process to raise the necessary capital is under way and they are confident the funding will be secured.
“We deeply regret the inconvenience this suspension will cause our customers,” Comair CEO Glenn Orsmond said. “We did everything we could to avoid it. Comair, the [business rescue practitioners] and the lenders are working all out to get the funding in place so that we can resume our normal flight schedule as soon as possible.”
He added that Comair is “inherently a viable business”.
On Wednesday Comair said it is not in a position to reveal the exact amount it needs to restart operations as negotiations with prospective funders are ongoing. Asked how employees will be affected, a Comair spokesperson said employees have been paid until the end of May.
“Our priorities now are to secure the capital we need to get back in the air as soon as possible and assist those customers affected by the suspension of flights,” the spokesperson said.
Phuthego Mojapele, an aviation analyst, said the latest grounding of Comair flights raises questions about the fate of the company.
“It would be difficult to say Comair will be making it back into the skies,” Mojapele said. “Airlines survive by credibility ... you cannot survive in the market without credibility. Their credibility started shaking when they were not able to address and communicate effectively on the first grounding [by the regulator due to safety concerns],” Mojapele said.
“They have again failed to communicate effectively on the latest grounding, waiting until the last minute to tell passengers,” Mojapele said.
Comair said that customers on British Airways flights will be able to change their travel dates or cancel existing tickets and then claim a voucher to the value of the booking, which will be valid for travel until the end of September 2023.
The operator said Kulula customers on suspended flights have the option of a “Travelbank credit or can request a full refund of their ticket value”.
The credit at Travelbank, an online account, can be used by the passenger or someone else.
Mojapele said airline ticket prices are likely to skyrocket as there is now more demand than available flights.
But the possible demise of Comair presents an opportunity for other domestic carriers such as SAA to increase their capacity and for new players to enter the market, Mojapele said.
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