Comair is unlikely to start operating again before November this year, notwithstanding the easing of restrictions on air travel as the airline requires a substantial cash injection, the company’s business rescue practitioners (BRPs) have told creditors and employee representatives.
The aircraft are currently in a preservation programme to ensure that they are ready to fly again, the BRPs said.
However, the resumption of operations now would require securing fuel suppliers and covering numerous other costs, which the airline would not be able to meet without a significant cash injection, it said.
The business rescue practitioners confirmed they were in discussions with funders to recapitalise the airline to resume domestic passenger operations by 1 November. Over 30 potential funders had been contacted and six are progressing discussions.
To ensure the future sustainability of the airline, Comair said it has acquired Infinea’s 50% shareholding of Nacelle. The negotiations began before Comair entered business rescue and the deal will give it full control of IT infrastructure, customer data, flight systems and support services.
Comair said it is not able to fund the deal now but has agreed to pay in instalments over 17 months once funding has been secured.
The BRPs said the proposed business rescue plan would include the rationalisation of the current fleet from 27 aircraft, including the grounded Boeing 737 MAX8, to 13 737-800s and three spare 737-400s.
The practitioners said that they have consulted extensively, both in South Africa and abroad, and it was considered that a downsized fleet would be more in keeping with what the company could afford to operate and demand for air travel post the Covid-19 crisis.
Shaun Collyer, one of the business rescue practitioners, said that employees had been placed on unpaid leave and retrenchment proceedings are continuing under the auspices of the CCMA.
“This unfortunate hardship has been imposed on Comair employees as a consequence of the Covid-19 lockdown and State-of-Disaster Act.”
The business rescue practitioners intend to have substantially implemented the plan by 31 March 2021, at which point the company will be handed back to the board of directors and management.
In a separate note to shareholders on Tuesday (2 June), Comair said that earnings per share (EPS) and headline earnings per share (HEPS) for the financial year ending 30 June 2020 are expected to be more than 100% lower than the EPS of 192.4 cents and HEPS of 197.2 cents in the previous corresponding period.
Comair reported a half-year loss of R564 million for H1 2020. This included R790 million that was unrecoverable after South African Airways (SAA) entered business rescue in early December 2019.
The money was for outstanding payments still owed on a R1.1 billion settlement of a Competition Commission complaint, the administrators said.
As a result of the Covid-19 lockdown, Comair has been unable to operate any scheduled passenger flights since 26 March 2020 and consequently has not been able to earn revenue.