Comair last week passed another significant way-point en route to returning to the skies when the vast majority of creditors and shareholders voted to adopt the proposed business rescue plan.
In terms of the business rescue plan the preferred investment consortium, comprising a number of former Comair board members and executives, will invest fresh equity of R500 million in return for a 99% shareholding once the suspensive conditions set out the business rescue plan have been met. Up to 15% of this will be allocated to a suitable BBBEEE partner within 12 months.
During the next two months, R100 million of this will be paid in two equal tranches as secured post-commencement finance. Additional funding from lenders of R1.4 billion is required and will comprise R600 million in new debt. The remaining R800 million 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 turnaround plan 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 is continuing.
It is intended that the fleet be restored to 25 aircraft, including two Boeing 737 Max aircraft. The aircraft will gradually return to service from December with a seven-month ramp-up period until June 2021. Existing relationships will be maintained with British Airways, Discovery Vitality, Slow Lounges and Boeing.
Comair CEO, Wrenelle Stander, welcomed the adoption of the business rescue plan which should save 1 800 jobs. She 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 lock-down meant the company was unable to earn any revenue.
“When the lock-down 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, says that a number of suspensive conditions in the plan must still be met. If this does not happen, then 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 South African flying public. After nearly six months of intensive work and negotiation in a fraught economic environment, it is an exceptionally positive result.”
Glenn Orsmond, representing the Comair Rescue Consortium, says Comair plans to recommence air services in December with both the British Airways and kulula brands.
“We are thankful for the support of the creditors and shareholders and humbled by the overwhelming support from the Comair staff. We are excited at the prospect of rescuing Comair and restoring it to its former position as the pre-eminent airline in South Africa.”
Should everything go according to plan the business rescue process should be concluded by 31 March 2021, after which Comair will continue to operate as a sustainable business.