Comair’s business rescue practitioners have lodged a court application to convert the business rescue proceedings into liquidation proceedings.

By Chris Buchanan

The company has been unable to raise the cash needed to continue operations. Comair has been in business rescue after running up billions of rands in debt and the BRPs have advised creditors they no longer believe there is a reasonable prospect that the company can be rescued. Read Smoke On Go’s original article below.

With Comair out of the mix due to financial woes, Kulula and British Airways planes are grounded and the South African consumer is left with fewer choices in air travel. SA Flyer’s Guy Leitch told Smoke On Go there’s a high probability we won’t see Comair in the skies again.

Comair’s grounding has seen a theoretical 40% of airline capacity taken out of South African skies but according to Guy Lietch, with Mango also out of the picture it leaves one and a half low-cost carriers still operating, FlySafair and Lift, added to the fact that we were only operating at 50% post COVID, the decreased capacity is not as great. He says Airlink and CemAir, are also likely to take up capacity and enter the low-cost market.

It’s in the pockets of travellers and the knock-on effect into the tourism industry that Comair’s demise will be felt, says Leitch. “The market pre-COVID was intensely competitive and many airlines were struggling to make any money at all and were actually losing money. So, there’s going to be a natural push upwards in prices and this is going to be compounded by a much stronger push up in prices by the rapid increase in oil prices”. Leitch says fuel comprises 35 to 40 percent of an airline’s operating costs.

The net effect is a double blow upwards on prices and the biggest loser here will be the VFR (visiting friends and relatives) market which is highly discretionary , never mind that IATA figures show, through the multiplier effect, that every one dollar spent in the airline industry equates to 30 dollars into the broader tourism economy.

That the Competition Commission has said it will step in to halt price increases, Leitch says is lip service, and that increases have already been felt.

Comair is now a private company, having de-listed from the JSE, so operating information pertaining to their aircraft lease agreements and staff contingency plans are proprietary and not public. What we do know is that the airline was aware in January that it had until 31 May to raise additional funding, so while it was unable to raise the funding while operating, Leitch says it’s unlikely it will be able to do so while it’s grounded. The bottom line he says, is that it will be some time until we see Kulula and BA back in the skies, if at all.

Confidence in South Africa’s airline market has been rocked by the grounding, compounded by the safety concerns of a few months ago and passengers need to know that the purchase of an airline ticket will get them to their destination reliably and on time. Leitch says we’re increasingly hearing stories of people struggling to get their money back on tickets purchased in advance.

And what of the British Airways franchise agreement? This and the other partnerships such as the Discovery Vitality relationship will be affected by a decrease in confidence in Comair says Leitch. He added that the BA agreement was almost essential to Comair’s ability to compete and could be lost, which will be an impediment to Comair ever getting back into the air.