As Kulula operator is set for liquidation, state-owned carrier Mango gets lifeline

South African aviation company Comair is on the brink of collapse after its business rescue practitioners filed a court application for liquidation this week. Administrators were unable to raise the funds needed to keep flying.

Comair is the partner of British Airways in South Africa, owner of low-cost carrier Kulula, and operates approximately 40% of domestic air trips. It said Thursday (9 June), that it has failed to secure the necessary funding to pull it out of financial straits, and its business rescue practitioners (BRPs) say there is no likelihood of rescue.

The aviation company suspended all flights on 1 June, less than three months after being grounded by the regulator over a series of safety incidents that required diversions and emergency landings. It went into business rescue in May 2020 after battling Covid-19 pandemic era lockdowns, travel bans, as well as rising fuel prices.

The group resumed flights in December 2020 while still in business rescue. It voluntarily suspended operations from 1 June, pending securing funding to resume operations.

“We did our utmost to secure the funding, but when we were unable to do so we had no option but to lodge the application for liquidation,” business rescue practitioner Richard Ferguson said in a statement. “It is an extremely sad day for the company, its employees, its customers and South African aviation.”

Bloomberg reported that Comair’s existing lenders and investors – a group of wealthy individuals who bailed out the airline in 2020 – were not willing to put in more funds.

The National Union of Metalworkers of South Africa (Numsa) said it met with Comair’s management team and Richard Ferguson. “Ferguson was unable to guarantee whether employees will get their salaries for the month of June and this includes the payment of medical aid and other benefits,” the union said, calling it worrying.

“Numsa is deeply concerned about the state of Comair and in particular what this means for workers and their families. At least 1,200 jobs are on the line if this airline collapses. We maintain that this situation is caused by mismanagement at the highest level.”

The union said it would make an application to the Department of Employment and Labour for employees to be placed on the Training Lay-off Scheme. “That way, whilst the airline is not operating, workers can at least earn some kind of salary while training. At the same time, every effort must be made to find an investor for the airline in order to prevent liquidation.”

Bloomberg said that the imminent collapse of Comair is a blow to South Africa’s air-travel market, which was already reeling from the loss of state-owned low-cost carrier Mango during the Covid-19 pandemic.

However, Mango’s business rescue practitioner is hopeful of a positive outcome for the state airline, a subsidiary of South African Airways.

In a status report published on 1 June, Mango’s business rescue practitioner noted that Public Enterprises minister Pravin Gordhan released funding worth R225 million to the state airline for its continued survival.

Mango’s business rescue practitioner, Sipho Sono, had previously taken the government to court over the release of state funds. Following Gordhan’s action, Sono withdrew his court application.

Sono said that the investor process is progressing according to the time frame agreed with the preferred bidder “and, accordingly, the BRP anticipates the purchase consideration will be deposited into the escrow account before the end of June 2022”.

“The BRP remains of the opinion that there is a reasonable prospect of rescuing the company, or that the BR proceedings would result in a better outcome for creditors and the shareholder of the company than would otherwise be achieved should the company be placed in liquidation,” said Sono.

Read: Discovery Bank to refund Vitality clients affected by Comair shutdown