Comair, which operates Kulula and British Airways flights, is set to be liquidated because its business rescue practitioners believe that the aviation company has no reasonable prospects of being rescued.
This means that after nearly 80 years of operating in South Africa’s aviation industry, Comair is likely to permanently close its doors because its two-year-long business rescue process failed to rehabilitate the company. Comair workers, estimated to be 2,000, are set to lose their jobs.
Comair will be the third airline to disappear from the skies over the past two years, further lessening competition in the local aviation industry. The Covid pandemic has floored the industry and resulted in the death of SA Express and the protracted grounding of Mango Airlines — both state-owned.
Comair, through Kulula and British Airways, enjoys a substantial market share in the local aviation industry, supplying about 40% of available seats (or market share). The permanent closure of the company will wipe out a lot of seat capacity.
The Comair business rescue practitioners, Richard Ferguson and Neil Hablutzel, have failed to secure funding from existing investors and commercial banks to fund the company’s rescue process and flight operations.
In a letter to Comair affected parties (such as the company’s creditors and staff) dated 9 June 2022, Ferguson and Hablutzel said the required funding “could not be raised in order for the company to continue with its operations”, paving the way for the pair to declare that the airline has no chance of success.
The funding problems at Comair pushed its rescue practitioners to ground Kulula and British Airways flights at the 11th hour on 1 June, inconveniencing customers who already booked tickets but couldn’t fly. This was the second time that Comair was grounded this year as its operations were also suspended on 12 March by South Africa’s aviation regulator because of safety concerns with its aircraft.
Comair’s business rescue seemed to have been heading on the path of success after a group of investors — including former Comair directors, one of whom is Martin Moritz, and an investment vehicle, Luthier Capital — injected R500-million into the company to take over its ownership and fund its business rescue process. Additional funding of R1.4-billion has also been secured from commercial banks.
But Comair investors and commercial banks were reluctant to inject more money into the company to fund its flight operations while its business rescue process was being completed.
“We did our utmost to secure the funding, but when we were unable to do so had no option to lodge the application. It is an extremely sad day for the company, its employees, its customers and South African aviation,” the Comair rescue practitioners, Ferguson and Hablutzel, said in a media statement.
And because of this, the Comair rescue practitioners have lodged a court application to convert the business rescue proceedings into liquidation proceedings, which is a requirement under the Companies Act. The Act governs business rescue proceedings.
If the court grants the liquidation application, a liquidator will be appointed to safeguard Comair’s assets and start a process of selling the company’s assets to free-up money to pay its outstanding debts of more than R4.9-billion.
Liquidation is often the worst-case scenario because the chances of a company being revived or rescued are low unless a buyer/investor is found at the last minute. In a liquidation process, creditors (such as suppliers, customers and staff) often don’t get the full amounts that they are owed. DM/BM