Comair, which operates British Airways and low-cost carrier kulula.com in South Africa, said earlier this month it had no choice but to go into business rescue after its implementation of a turnourand strategy was disrupted by a national lockdown to flatten the curve in the spread of Covid-19, grounding air travel.

On Tuesday the airline said practitioners Shaun Collyer and Richard Ferguson had held the first formal meetings with creditors and employees.

Collyer said Comair had reported a half-year loss of R564 million (about US$39.9 million) for the first half of 2020, including R790 million that was unrecoverable after national carrier South African Airways entered its own business rescue last December. 

The money was for outstanding payments still owed on the R1.1 billion settlement of a Competition Commission complaint.

Collyer said as a result of the Covid-19 lockdown, Comair had also been unable to operate any scheduled passenger flights since March 26 and consequently had not been able to earn revenue. 

But he stressed that the airline was not factually insolvent as it had R7.42 billion in assets on its balance sheet compared to liabilities of R5.48 billion.

Rather, it was financially distressed because there was insufficient cash to pay ongoing costs and obligations and, with its flights grounded for an uncertain period, no opportunity to generate revenue.

Collyer said the practitioners believed there were reasonable prospects for Comair to be rescued through business rescue proceedings, partly because it was competitively well placed, having enjoyed a 39 percent market share for domestic travel and also because it had goodwill and a longstanding reputation in the travel community and with the public and customers.

He said the successful rescue would depend on the support of all stakeholders and this would include post-commencement finance.

"The next step in the business rescue process is the formation of a creditors’ committee and an employee representatives' committee respectively," Tuesday's statement said.

A business rescue plan is expected to be published on June 9, with a vote to approve it due on June 24.

African News Agency