The argument by the Organisation for Economic Cooperation and Development (OECD) that tightening South Africa’s wealth tax regime would rebalance ... generational inequality has a fundamental flaw: it targets a “flighty” base, says an expert from the African Tax Institute.
“Progress has been made in this regard and a further update will be provided in the next status report at the end of March,” said Orsmond in a written response.
“We are not able to disclose figures [for the new fund-raising plan], as there is an ongoing process. We will provide a status update at the end of the month,” said Orsmond.
“Comair has been, and is in an ongoing process of, restructuring its balance sheet from both a debt and equity perspective. This has involved engagement with Comair’s investors and lenders to ensure that the appropriate type and quantum of funding is raised,” he added.
Orsmond points out that: “These processes have been, to date, successful. The latest initiatives are advancing satisfactorily, the outcome of which should vest shortly.”
Comair has an estimated 40% share of South Africa’s domestic travel market. Kulula is its low-cost domestic carrier. It operates full-service domestic and regional flights through British Airways under a franchise licence agreement.
Business rescue plans
Comair, one of the largest regional commercial airline companies in Southern Africa, flew into financial distress at the onset of the Covid-19 crisis in 2020 and entered into voluntary business rescue in May of the same year.
Unlike a liquidation, which results in a rapid-fire sale of a company’s assets and its complete wind down – leaving unsecured creditors, staff, and other stakeholders out in the cold – business rescue enables an orderly salvage process.
Crucially, business rescue makes provision for a company to seek forbearance for its payment obligations from lenders while also enabling an entity to receive liquidity injections in the form of post-commencement finance.
South African commercial law stipulates that business rescue should take three months but accommodates extensions on reasonable grounds.
In September 2020, Comair’s business rescue plan was finalised. Since its adoption, the plan has undergone amendments.
Business rescue practitioners Richard Ferguson and Neil Hablutzel, hired by Comair in 2020 to drive the company’s original business rescue plan, have asked a consortium led by former Comair executives and directors to devise a fresh capital-raising plan to address the company’s funding needs.
The consortium has already injected R500m ($34.2m) into the business in exchange for a 99% shareholding.
In addition, the carrier required R1.4bn in additional funding from lenders, which would comprise R600m in new debt and R800m in deferred debt. Comair de-listed from the Johannesburg Stock Exchange, revamped its board and downsized its staff from 2,200 to 1,800. In August 2021, Comair sold its SLOW lounge business for R250m to South African holding company FirstRand.
The company is also pursuing a case in the US – at the Southern District of New York – against Boeing in terms of which it is challenging a 2013 aircraft purchase agreement for the sale, manufacture and delivery of eight 737 MAX planes.
Comair’s ongoing business rescue efforts were badly affected by three successive Covid-19 waves, the most notable of which was the one driven by the Omicron variant first discovered by South African scientists.
That resulted in the country’s red-listing from key international markets, including the UK, at the peak of South Africa’s inbound tourism season. As a consequence, Comair suffered a R100m working capital shortfall from sold and paid, but unflown, tickets.
More recently, Comair suffered a setback on 12 March when the South African Civil Aviation Authority (SACAA) grounded Comair’s entire fleet for five days, citing a spate of safety incidents including engine failures and landing gear malfunctioning.
The company resumed British Airways and Kulula flights last Wednesday after the SACAA lifted the carrier’s air operator certificate suspension.
As Comair’s consortium crafts a funding plan, the National Union of Metalworkers of South Africa (NUMSA) has bemoaned the duration of the company’s business rescue and associated cost-cutting measures.
Comair employees affiliated to NUMSA staged a protest at the carrier’s offices in Gauteng last Tuesday and handed over a list of demands – one of which is a call for Orsmond’s firing. The labour union gave Comair until Thursday to respond.
Asked about the end of March deadline and NUMSA’s demands, Orsmond responded: “We continue to engage with all unions representing our employees. We were grateful for the support these unions provided during the SACAA precautionary suspension. The engagement with NUMSA is one between the company and the union.”
Orsmond concluded: “Our focus is to secure a sustainable future for the airline and ensure employee job security and wellbeing.”
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