Comair’s rescue plan might see 400 employees retrenched, if approved

Following the publication of Comair’s business rescue plan on Wednesday, 2 September, the airline confirmed that the process might see only 400 employees being laid off through voluntary retrenchment and early retirement programmes.

In a statement, Comair, which operates British Airways flights and Kulula in the country, said it was looking to resume its services in December if the business rescue plan, is accepted.

The airline said creditors and shareholders have until 18 September to consider and approve the plan.

“The publication of the plan follows negotiations with a preferred investor which will see a fresh equity injection of R500 million in return for a 99% shareholding.

“Up to 15% of this shareholding will be allocated to a suitable BBBEE partner within 12 months,” it said.

Comair further said the first R100 million will be paid in two equal tranches in September and October as secured post-commencement finance.

READ MORE: DPE’s plan for SAA will see all employees retrenched with only 1,000 remaining

The airline added that an additional funding from lenders of R1.4 billion was required in order to successfully implement the plan.

“This will comprise R600 million in net new debt. Existing debt will be deferred to provide the remaining R800 million, with capital payments deferred for 12 months and interest for six months.”

Comair continued to say that the airline would be de-listed from the Johannesburg Stock Exchange (JSE) and a new board constituted in due course in the process.

“The turnaround plan is focused on rationalising operating costs and growing ancillary revenue.

“In line with this, the workforce will be reduced from approximately 2,200 employees to 1,800 through a voluntary retrenchment and early retirement programmes, as well as the continuation of the Section 189 retrenchment process that the company commenced prior to business rescue.”

The airline added the fleet would comprise 20 aircraft of which 17 would be next-generation Boeing 737-800s and the remaining three Boeing 737-400s.

“This fleet mix increases the proportion of owned aircraft, which limits exposure to foreign currency risk. The aircraft will gradually return to service from December with a seven-month ramp-up period until June 2021.”

ALSO READ: Numsa condemns Comair for failing to pay workers’ salaries

It further said that other elements of the plan include maintaining the existing relationships with British Airways, Discovery Vitality and Boeing.

“In the event that the suspensive conditions in the plan are not met, the plan details how the company will be wound down in a structured manner as this will achieve a better return for creditors than a liquidation.”

One of Comair’s business rescue practitioners, Richard Ferguson said that if creditors approved the plan, the business rescue process might be concluded by 31 March 2021, if not sooner.

“It is important to understand that what happened to Comair was the result of an eco-system problem that has seen some 600 airlines around the world cease to operate. It was not something that was business-specific.

“Comair is a national asset. Getting it back in the air will save 1 800 jobs, provide the flying public with more choice and competitive fares, strengthen the aviation sector and contribute to the broader South African economy.”

(Compiled by Molefe Seeletsa)

For more news your way, download The Citizen’s app for iOS and Android.