JOHANNESBURG (Reuters) - Comair (COMJ.J) said on Tuesday that it had entered voluntary business rescue - South Africa’s bankruptcy protection process - after a nationwide lockdown to curb the spread of the coronavirus forced airlines to suspend all commercial flights.
Comair joins state-owned South African Airways, which filed for business rescue in December, as well as state-owned SA Express which was placed under “provisional liquidation” last Tuesday.
The airline, which operates the British Airways franchise in South Africa and owns budget airline Kululais, is already going through a restructuring announced late in March, aimed at preserving cash, cutting costs and jobs, disposing of non-performing assets and strengthening its balance sheet.
Its financial challenges, which include significantly higher fleet and maintenance costs, have been aggravated by the impact of the virus on global travel demand, Comair said.
Comair Chief Executive Wrenelle Stander, said the company, which reported a half-year loss of 564 million rand ($30.73 million) in February, faced an unprecedented situation following the five-week-long coronavirus lockdown, which was partially lifted from May 1.
Stander said the only responsible decision in response to the travel restrictions was to apply for bankruptcy protection.
“These extraordinary circumstances have completely eroded our revenue base while we are still obliged to meet fixed overhead costs,” she said.
“This is a necessary process to ensure a focused restructuring of the company takes place as quickly as possible so we can take to the skies again.”
Under the restructuring plan, Comair is currently finalising consultations with staff over job cuts and is in negotiations with a consortium of banks for bridging finance.
The company said on Tuesday it was also looking at options to raise additional capital, including via a rights issue or convertible preferred share issue or convertible loan note issue.
Comair is also joining industry initiatives to lobby the government for special aid or concessions and an earlier date to resume flights.
Comair started grounding some planes from March 17 until a total halt from March 26, when the lockdown started.
A partial lifting of South Africa’s lockdown will take place in five phases. Comair said it appeared that restricted air travel would start at level 3, full domestic air travel at level 2 and regional and international air travel at level 1.
Stander said Comair would resume its operations in accordance with government directives but the grounding of flights is likely to last until October or even November.
The airline was granted approval to suspend the trading of its shares on the Johannesburg Stock Exchange with immediate effect.
“We are confident that with the work we’ve already done and the support of our stakeholders we will get through this process and will be a more sustainable business,” said Stander.
Editing by Olivia Kumwenda-Mtambo/Jonathan Oatis/Jane Merriman