Comair needs more working capital to complete the rescue process

In mid-March, the South African Civil Aviation Authority imposed a preventive suspension of Comair’s Aircraft Operator Certificate (AOC) for a period of five days.

• Comair needs more working capital after dealing with the fallout from high oil prices and restrictions on international travel during the festive season.
• In their latest report, Comair’s business rescue practitioners explain why more money is needed – but do not specify how much.
• The successful bidder has already raised some of the additional funds needed and is developing a plan to raise the rest.

Comair must raise more working capital after dealing with the fallout from high oil prices, restrictions on international travel during the December holiday period and the “serious” impact of the temporary suspension of its flights.

That’s according to the latest report from the firm’s business rescue practitioners. The report does not say how much funds should be raised.

Comair, which operates its own low-cost airline kulula.com, as well as British Airways domestically under a licensing agreement, launched a commercial rescue in May 2020. The Comair Rescue Consortium (CRC), comprising of several former board members and executives of Comair, was chosen as the preferred bidder.

According to the report, Comair needs additional financing in the short and medium term. The report adds, however, that the CRC has already raised a significant portion of the necessary working capital and is preparing a plan to raise the rest.

“Although the price of Brent crude oil appears to have stabilized at around $110 per barrel, the impact on the operational performance of airlines worldwide, including Comair, has been significant. This, combined with the ” South Africa’s ‘red list’ in December 2021 and January 2022, forced the company to raise more working capital,” the rescue practitioners say.

The operator has faced a number of setbacks in recent years. More recently, in mid-March, regulator SA Civil Aviation Authority (SACAA) imposed a precautionary suspension of Comair’s aircraft operator certificate (AOC) for five days after what it called “a series of ‘incidents’, including problems with the landing gear indicator. on one of the flights.

Meanwhile, Comair’s legal battle in US court to overturn a contract to purchase eight 737 MAX jets from US manufacturer Boeing continues. The Boeing 737 MAX jetliner was grounded worldwide between March 2019 and approximately December 2020 after two fatal crashes – one by Lion Air and the other by Ethiopian Airlines.

Rescue practitioners are also continuing negotiations with aircraft lessors on revised short-term arrangements.

Fin24 reported last week that Comair had decided to halt a redundancy process launched in March after pressure from SA’s National Union of Metalworkers (NUMSA) and the SA Cabin Crew Association (SACCA), but says it must still finding ways to reduce staff. and costs in order to remain sustainable.

In December last year, the Competition Tribunal approved FirstRand Bank’s acquisition of Comair’s airport lounges in Johannesburg, Cape Town and Durban to secure a cash injection of around R250 million.