The operating licence of British Airways’ franchise partner, Comair, has been suspended by the Civil Aviation Authority in South Africa(“SACAA”).
Comair was forced to cancel all flights on Saturday. The SACAA suspended Comair’s operating licence following a number of safety incidents. These included engine failures, engine malfunction and landing gear malfunctions.
Three of these incidents were described as a “Level 1” finding. This is considered an immediate risk to safety and security that must be closed immediately.
The suspension was initially described in a statement by the SACAA on Saturday as precautionary, pending a response from Comair that it had effective risk and safety management systems in place.
British Airways’ franchise partner in Southern Africa, Comair, plans to resume flights from December 2020.
Comair has been in a business rescue process since early May. It had been required to suspend flight operations on 26 March due to lockdown in South Africa. The airline had also been suffering due to high debt levels, the grounding of the Boeing 737 MAX and non-payment of compensation by South African Airways.
Under a Business Rescue Plan published yesterday, Wednesday 2 September, the airline will be recapitalised. It will receive a financial injection of R500 million by a new investor in return for a 99% shareholding in the airline.
Comair will also require additional funding from lenders of R1.4 billion. This will comprise R600 million of new debt. Comair’s existing debts will be deferred to provide the remaining R800 million, with repayments deferred for 12 months and interest deferred for 6 months.
It is intended that Comair maintain its dual brand structure, operating as British Airways under a franchise and as Kulula. According to the list of creditors BA was owed R50,998,152 (~£2.2m) by Comair. As a consequence of the Business Rescue process, BA’s shareholding will be wiped out.
Comair aims to resume flight operations from December 2020 with a view to operating a full flight schedule by June 2021.
It is expected that Comair’s fleet will initially comprise 20 aircraft of which 17 will be Boeing 737-800 aircraft and the remaining 3 will be Boeing 737-400 aircraft. This may ultimately increase to 25 aircraft and compares to a fleet of 27 aircraft before Comair suspended operations.
The Business Rescue Plan is subject to a vote by creditors and shareholders which will close on Friday 18 September.
British Airways’ franchise partner in Africa, Comair, will remain grounded until November 2020 at the earliest.
Comair is currently in a process known as “business rescue” whereby it seeks to restructure itself whilst protected from creditors.
In addition to operating a BA franchise in Africa, Comair also operates the Kulula airline brand and SLOW lounges in Africa.
Business rescue practitioners have been appointed to oversee the process. They have today, Tuesday 2 June 2020, published an outline plan for the company.
Comair’s airlines will remain grounded until November 2020 at the earliest as the company requires a substantial cash injection to resume trading.
The business rescue practitioners have approached 30 potential investors to secure new funding and 6 are in active discussions.
Whilst Comair intends to focus on its airline business, it is expected that Comair’s fleet will be substantially downsized from 27 aircraft to 13 Boeing 737-800 aircraft and three spare Boeing 737-400 aircraft.
With such a significant reduction in fleet it seems implausible that it will continue to operate under both the BA and Kulula names.
Neither BA nor its parent company IAG have made any official comment on the business rescue process. BA owns a 11.49% stake in Comair. If neither BA nor IAG participate in a recapitalisation of the airline, its shareholding will be wiped out.
It will be for Comair’s new shareholders to decide on its business model and whether the BA franchise should continue. Currently, BA is still selling flights on Comair from 1 November 2020.
British Airways’ franchise partner in Africa, Comair, has entered a Business Rescue Process.
This is a formal restructuring process, similar to Chapter 11 in the United States. Business Rescue Practitioners have been appointed to oversee the running of the company and a restructuring, with the aim of avoiding a liquidation.
Originally founded in 1946, Comair also operates the airline brand Kulula and SLOW lounges in Africa. Its airlines are currently grounded and it does not expect to resume operations until October 2020 at the earliest.
British Airways owns a 11.49% stake in Comair. It became a BA franchise in 1996. It operates routes to destinations in South Africa, Mauritius, Namibia, Zambia and Zimbabwe from its main hub at Johannesburg with a fleet of Boeing 737 aircraft.
The BA franchise is clearly very important to BA’s brand presence in South Africa and providing connecting traffic to and from BA’s long-haul routes to London. Comair is one of two remaining BA franchise partners. The other being SUN-AIR of Scandinavia.
Comair’s state owned rival South African Airways is expected to be liquidated with a new airline formed.
Comair has issued the following statement. Note the comment from its CEO Wrenelle Stander about reviewing joint-ventures. Whilst Comair’s BA franchise is highly regarded, it is of course at liberty to end its franchise agreement with BA.