Business rescuers seek more time to finalise plan to save Comair

COMAIR, which is in business rescue, will be going to the markets to raise capital by issuing ordinary or preferred shares to recapitalise the airline, following declining revenues due to the impact of the coronavirus.

The troubled airline needs a substantial cash injection to fly again, as it intends to resume domestic passenger air travel on November 1. This would happen only if unrestricted domestic air travel was commercially viable by that time and the company has sufficient funding to recommence operations.

Comair said on Friday that the proceeds raised through a combination of equity capital and asset disposal would see it paying its creditors, including employees, a distribution higher than the probable liquidation dividend.

The operator of British Airways in South Africa and low-cost airline kulula.com would reduce its operational aircraft fleet by half as part of a cost-saving drive.

The company said it intended to keep 13 737-800s and three 737-400s of its 27 Boeing planes.

Comair, which has placed its workers on unpaid leave, would also continue with a retrenchment process, as a reduced aircraft fleet would also reduce its operational requirements.

It would also renegotiate and/or refinance its aircraft finance and lease agreements while identifying which of its assets should be disposed of.

However, Comair on Friday said that the current shareholders would be substantially diluted if it was able to successfully raise equity capital.

The company said it had contacted more than 30 potential funders in a bid to recapitalise the airline so it could resume domestic passenger operations by November 1.

The price of the shares to be issued was yet to be determined by the business rescue practitioners as its shares were suspended on the JSE.

In the past three months alone, Comair has wiped nearly R500m off its market capitalisation.

Last week, Comair reported a R564 million loss for the first half of 2020, following an unprecedented situation due to the Covid-19 lockdowns that nearly collapsed the global aviation industry.

Comair said its profits for the year to the end of June would fall more than 100 percent, only days after it filed for voluntary business rescue.

The airline has not been able to operate any scheduled passenger flights and earn revenue since March 26 when the lockdown began.

Moody’s on Friday warned that the global aviation sector would not see a significant recovery before 2023, as passenger demand would remain severely depressed even after the pandemic no longer posed a threat.

The ratings agency said the aviation sector will undergo substantial permanent structural changes, unless a vaccine was developed or effective treatment becomes available.

“The consequences of the coronavirus are likely to reshape the global airline industry. In the first instance, this will be because of a potential reduction in the amount of weaker airlines,” Moody’s said.

“We expect the sector to bifurcate between larger, more efficient airlines with strong liquidity, and those that have less efficient business models, but survive because their strategic importance prompted their governments to provide support.”