South African airline Comair said on Tuesday it would enter business rescue—the South African equivalent of a U.S.-style bankruptcy process—to safeguard the interests of the company and its stakeholders after the Covid-19 crisis disrupted an existing turnaround plan. The company, which reported a loss of 564 million South African rand ($30.1 million) during the first half of its 2020 fiscal year, stopped flying on March 26 in response to a nationwide lockdown and expects to remain grounded until at least October.
"While we had started making good progress to fix the financial situation six months ago, the crisis has meant we have not been able to implement it as we intended, said Comair CEO Wrenelle Stander. “We completely understand and support the government’s reasons for implementing the lockdown; however, as a result, we have not been able to operate any flights. Now that the phased lockdown has been extended, the grounding is likely to endure until October or even November. These extraordinary circumstances have completely eroded our revenue base while we are still obliged to meet fixed overhead costs. The only responsible decision is to apply for business rescue."
Comair gained approval to suspend the trading of its shares on the Johannesburg Stock Exchange. The company said the business rescue process will build on an existing turnaround that aims to preserve cash, cuts costs, dispose of non-performing assets, and strengthen the balance sheet. Comair recently said it planned to cut jobs and had entered talks with Boeing over the cancellation of orders for 737 Max 8s, according to Reuters.
"Through this process we intend to right-size our operations to be more efficient, agile, and customer-centric,” said Stander. “This includes, but is not limited to, reconfiguring our network and fleet mix, reviewing portfolios and joint ventures, increased digitization of the business and new product development and delivery."
The CEO added that Comair will continue to engage with legislators to accelerate the re-opening of the airline industry. "The health and welfare of our customers, crew, and the public is the overriding priority and we will only operate when we are sure we can do so safely," he insisted. "We are confident that with the work we’ve already done and the support of our stakeholders we will get through this process and will be a more sustainable business, better positioned to continue serving the flying public and contributing to the South African economy."