Coronavirus: South Africa’s Comair lands into business rescue
Comair, the listed regional and local airline operator, has ordered an immediate halt to trading in its shares and entered into voluntary business rescue.
The homegrown carrier’s board will relinquish operational oversight and control of the Johannesburg Stock Exchange (JSE)-listed company to a soon-to-be appointed business rescue practitioner, it told the market late on Tuesday.
In a sign of the extraordinary times and unprecedented crises facing the domestic economy and the regional environment, this is the first instance in the airline’s history that it has plunged into financial trouble.
For the past 74 years, Comair has run a profitable operation.
However, “the Company is unable to operate given the current restrictions in place. It is not anticipated that Comair will commence operating prior to October or November 2020,” it said.
In South Africa, Comair holds the operating licence for British Airways and owns Kulula, a low-cost domestic airline brand. In the local market, Kulula is a direct competitor to South African Airways subsidiary, Mango.
Comair runs flights to central airports in Southern Africa and the Indian Ocean Islands, as well as centrally located airports in South Africa.
Weighed down by lockdown
Since the end of March when South Africa closed its borders and ports of entry amid a COVID-19 outbreak, domestic and regional air travel stopped.
The government recently announced a phased approach to ease lockdown restrictions. This encompassed the introduction of five levels. Level five represents the highest risk and level one denotes low risk.
Currently, South Africa is under level four of lockdown, meaning there is limited economic activity and strict restrictions on movement remain.
“Unfortunately, due to the … restrictions, operations have ceased,” said the company.
“The board resolved on 4 May 2020 to commence with voluntary business rescue proceedings as provided for by … the Companies Act.
“In the light of this decision, the board has applied to the JSE – and was granted approval by the JSE – for the suspension of trading in the company’s shares … with immediate effect in terms of … [the] listing requirements,” it explained.
The Comair board opted for the suspension of shares because:
- It will no longer control the company.
- “[It] is not in a position to confirm to the JSE that the company will be able to comply on an ongoing basis with the … listing requirements.
- “With the material discussions to be undertaken with all stakeholders, the risks of leaks of price sensitive information are great, which could result in different levels of information in the market.”
Uncertain times ahead, but wings not clipped
Furthermore, Comair’s board is uncertain which of the company’s operations will continue and on what basis. This is so because a business rescue process will entail retaining the good parts of Comair’s operations, while exiting those in dire straits.
Job losses will be an inevitable outcome of the process, but the extent remains unknown.
“The Comair business model is sound as the airline has been profitable for the past 74 years. The board believes that once operational again, Comair will take to the skies and return to being a major player in the South African airline industry,” said the company.