The second grounding of Comair in just over two months — this time because of funding issues — is a body blow for the operator of Kulula.com and British Airways in SA, which now faces a tough task to regain public confidence.
Comair on Tuesday evening suspended all BA and kulula.com flights as it seeks to secure additional funding. In March, the South African Civil Aviation Authority (CAA) suspended the company’s Air Operator Certificate for five days over safety concerns.
“The grounding in March did have an adverse impact on the company’s financial position and it has contributed to its current situation,” Comair said in response to questions from Business Times.
CEO Glenn Orsmond said “additional funding is required due to the current liquidity shortfall”, adding that Comair Rescue Consortium, the new group which owns Comair, was “engaged with prospective funders” but was “not in a position to commit to a timeline”.
The consortium confirmed this week that it has been looking for funding since January to compensate for the almost R100m loss in revenue arising from the international travel bans that followed the emergence of the Omicron variant of Covid-19 in November.
The airline went into business rescue in May 2020 due to the suspension of most domestic and international flights during hard lockdown.
In terms of the business rescue process, the consortium previously agreed to invest R500m in return for most of the company, while a further R1.4bn, comprising R400m in new borrowings and R800m in deferred debt, was to be secured from banks to execute the recovery plan.
The consortium consists of Monster Beverage founders Rodney Sacks and Hilton Schlosberg, former Comair board members Martin Moritz and Steven Herring, and investment firm Luthier Capital.
Professor Jackie Walters of the Institute of Transport & Logistics Studies at the University of Johannesburg said the decision on Tuesday night to halt flights must have been the “very last resort” and the situation facing the airline, which handles about 40% of domestic travel capacity, “must be very serious”.
The decision to stop flying was made by the airline’s business rescue practitioners and Orsmond.
Walters said the earlier grounding of Comair in March had already harmed the airline and confidence in the airline after customers who had booked tickets to fly at that time were left stranded. He said the latest grounding would have “a huge impact on the airline going forward and its sustainability”.
Walters said even if the necessary funding is obtained, customers would be careful about booking tickets with Comair over the next few months because of the latest grounding
Walters said even if the necessary funding is obtained, customers would be careful about booking tickets with Comair over the next few months because of the latest grounding.
He said it did not “augur well for them restarting and it does not augur well for the trust of passengers booking tickets”.
Walters said the suspension of Comair flights would affect the market and “there would be capacity issues for the foreseeable future while Comair remains temporarily grounded.
He said it was essential that Comair started flying again so there is adequate competition in the market. The grounding of the airline in March after a series of safety incidents involving technical issues was an “over-reaction by the regulator”, he added.
May, June, July and August were quieter months for domestic tourism and the airline industry and Comair must be feeling the “drop in passengers quite severely” he said.
The airline sector was also not operating at its optimal level because the domestic market is only at 60% of its pre-pandemic levels, Walters said.
Aviation economist Joachim Vermooten agreed that the March grounding of the Comair fleet by the CAA was unfair since only one aircraft had been a problem at the time.
The grounding in March would have had a significant effect on the airline, he said, adding that the group would have felt the steep drop in revenue keenly after not being able to fly for almost a week.
“We don’t have insights into the financial statements, but it must have had a massive effect.”
Vermooten said Comair’s board was also likely looking at the future when it made the decision to stop flying this week, specifically in light of the Ukraine war as there is “unlimited potential for fuel price increases which can’t be passed on to existing bookings”.
In addition, across the industry, the average load each aircraft carried was 91 passengers in March, Vermooten said, as the impact of the pandemic is still being felt. While this was a significant improvement on the average of 68 in July last year, it meant airlines were nowhere near filling the average 180-seater planes in their fleets.
Meanwhile, the National Union of Metalworkers of SA (Numsa), which represents about 700 of the 1,200 workers at Comair, “condemned” Orsmond and the group’s business rescue practitioners for suspending operations. It also called for Orsmond’s immediate resignation.
Speaking after a meeting on Thursday with Comair management, Numsa spokesperson Phakamile Hlubi-Majola said the meeting was very frustrating, and that simple questions could not be answered.
“These were questions around how long is this suspension of operations going to be in place for. We don’t know how much money is needed for them to be sustainable and we don’t know whether salaries will be paid and they wouldn’t give definitive yes or no answers.”
Responding to Numsa, Orsmond said: “Everyone’s priority at the moment should be to get our aircraft back in the skies. Our focus needs to be to work together to do that, save jobs and an important South African airline, and as CEO I’m dedicated to doing that.”
Asked whether its relationship with BA would continue in light of the latest funding issues, Comair said: “It is anticipated that in the event that the necessary funding is secured, the relationship will continue.”
BA’s press office in the UK said it was “saddened” to hear the airline had suspended operations and that it was “working with Comair to contact affected BA customers due to fly with BA to offer rebook and refund options, including travel on another carrier where possible”.
Vermooten said Comair had an experienced board and management team and he was confident they would be able to restart operations.
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