Comair is not factually insolvent, but financially distressed as a result of being grounded due to Covid-19 air travel bans, the aviation group’s business rescue practitioners (BRPs) said in a statement on Tuesday.
Shaun Collyer and Richard Ferguson, the BRPs appointed by Comair to handle its business rescue proceedings, have highlighted the fact that the group has R7.42 billion in assets on its balance sheet compared with liabilities of R5.48 billion.
Collyer said it was important to distinguish between factual and commercial insolvency, adding that the BRP’s believed there were “reasonable prospects for Comair to be rescued” through business rescue proceedings.
Following its decision to go into business rescue on May 5, the owner of kulula.com and operator of British Airways domestic flights in South Africa, also suspended trading of its shares on the JSE.
“Comair is not factually insolvent…. Rather it is financially distressed because there is insufficient cash to pay ongoing costs and obligations and, with its flights grounded for an uncertain period [and] no opportunity to generate revenue,” Collyer stressed.
Backing his belief that the company can be saved, he noted that in addition to the group’s assets exceeding liabilities, Comair is regarded as “a critical infrastructure asset” for South Africa.
“It is competitively well placed, having enjoyed a 39% market share for domestic travel… And, there is immense goodwill and a longstanding reputation in the travel community and with the public and customers,” he added.
Collyer said that the successful rescue of Comair’s business would depend on the support of all stakeholders, and this would include post-commencement finance.
He reiterated that as a result of the Covid-19 lockdown, Comair has been unable to operate any scheduled passenger flights since March 26, 2020, and consequently has not been able to earn revenue.
“When the government subsequently announced that the lockdown would be lifted in phases, and domestic flights would only resume in level 2, Comair had no choice but to file for business rescue,” he said.
Meanwhile, Ferguson said that a business rescue plan is currently being prepared in consultation with affected parties. The affected parties include the group’s creditors, shareholders, registered trade unions and employees. If approved and adopted they would then implement the plan.
The next step in the business rescue process is the formation of a creditors’ committee and an employee representatives’ committee respectively.
Creditors wishing to submit claims can download claim forms from www.comair.co.za/business-rescue/creditor-claims