South African operator Comair Limited has been on life support for the past few months. In fact, the company has been going through business rescue proceedings since May – a particular form of bankruptcy protection. With the operations of its two airlines currently suspended, it was recently disclosed that Comair would be able to start flying again as soon as December 2020, pending the adoption of a business rescue plan.
Raising funds, cutting expenses
According to Reuters, administrators responsible for restructuring the business note that Comair requires up to 1.2 billion rand ($72 million) in funding in order to function once again. Of the 1.2 billion rand, the plan also proposes that investors inject up to 500 million rand of equity. This will give them 99% ownership of the company. Creditors would also provide new debt funding of up to 600 million rand. Finally, insurer Discovery Ltd. would issue another 100 million rand in debt.
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In addition to this significant injection of funds, the airline operator will have to cut nearly 20% of its workforce. In fact, Reuters reports that this represents 400 jobs from a workforce of approximately 2,200.
Comair’s fleet will shrink as well, down to 25 aircraft from 27. Comair Limited oversees both the full-service British Airways brand in South Africa, as well as low-cost carrier brand Kulula.com.
Plan to be approved on September 18th
As per the timeline set by the business rescue practitioners, stakeholders will have the next two and a half weeks to consider the plan that has been put forth.
In charge of the company’s restructuring are business rescue practitioners Shaun Collyer and Richard Ferguson. The pair were appointed on May 5th and had been providing all affected stakeholders with regular updates on the process. Stated within the September 2nd proposal, which needs stakeholder approval, Collyer and Ferguson said:
“This (plan) will further result in resumed employment for the company’s remaining employees, the provision of flying services to its customers and the establishment of resumed revenue with which to service its obligations,”
Up and running by December 1st
If this plan does indeed achieve approval on September 18th, it can be implemented by the end of November with airline operations resuming by December 1st.
A published statement on the Comair website notes that “Comair remains solvent and an important contributor to the South African economy…Stay safe until we take to the skies with you again.”
Do you think this plan will be approved and adopted come late September? Or will there be some pushback? Can Comair and its two airline brands make it through this crisis? Let us know your thoughts in the comments.