Embattled aviation group Comair confirmed on Friday that the “vast majority” of its creditors and shareholders have voted to adopt its business rescue plan.
This will see the group get a fresh cash injection of R500 million and be back in the air by December, however it means Comair will effectively be taken private and delisted from the JSE.
Comair, which owns low-cost airline kulula.com and operates British Airways local flights in South Africa, filed for business rescue on May 5 after being grounded due to the Covid-19 lockdown regulations. At the time it also suspended trading on the JSE.
The devastating financial impact of the initial “hard lockdown” and its business rescue process meant that it could not take to the skies with major competitors, Flysafair and Mango, when local flights were allowed from June.
“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 Broad-based BEE partner within 12 months,” the aviation group said in a statement on Friday afternoon.
“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,” it added.
Comair confirmed that it will be delisted 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,” the aviation group noted.
The around 400 job cuts comes through voluntary retrenchment and early retirement programmes, as well as the Section 189 retrenchment process that began prior to business rescue continuing.
“It is intended that the fleet be restored to 25 aircraft, including two Boeing Max aircraft. The aircraft will gradually return to service from December with a seven-month ramp-up period until June 2021,” said Comair.
The group added that 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.
“When the lockdown 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,” she said.
Richard Ferguson, one of the business rescue practitioners, said 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 [the adoption of the business rescue plan] 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,” he said.
Glenn Orsmond, representing the Comair Rescue Consortium, confirmed that 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.”
Comair’s business rescue process should be fully concluded by March 31 2021, if all goes according to plan.