What will happen to Kulula and when it will start flying again

Kulula owner Comair has said it is unlikely to resume operations before November, even as restrictions on air travel are relaxed under level 3 lockdown.

The airline company’s business rescue practitioners told creditors and employee representatives it requires a substantial cash injection before it can resume flying.

The company’s aircraft are currently in a preservation programme to ensure that they are ready to fly again when operations resume.

In order to operate again, however, it needs to secure fuel suppliers and cover numerous other costs which it said it would not be able to meet without a significant cash injection.

The business rescue practitioners confirmed they were in discussions with funders to recapitalise the airline in order to resume domestic passenger operations by 1 November.

Over 30 potential funders had been contacted and six are progressing discussions, they said,

To ensure the future sustainability of the airline, Comair had acquired Infinea’s 50% shareholding of Nacelle.

The negotiations began before Comair entered business rescue and the deal will give it full control of IT infrastructure, customer data, flight systems, and support services.

However, the business rescue practitioners said Comair is not able to fund the deal at this time. It has agreed to pay in instalments over 17 months once funding has been secured.

Business rescue plan

The practitioners explained Comair’s proposed business rescue plan would include the rationalisation of the current fleet from 27 aircraft, including the grounded Boeing 737 Max 8, to 13 737-800s and three spare 737-400s.

The business rescue practitioners had consulted extensively, both in South Africa and abroad, and it was considered that a downsized fleet would be more in line with what the company could afford to operate.

One of the business rescue practitioners, Shaun Collyer, said that employees had been placed on unpaid leave and retrenchment proceedings are continuing under the auspices of the CCMA.

“This unfortunate hardship has been imposed on Comair employees as a consequence of the COVID-19 lockdown and State of Disaster Act,” Collyer stated.

Comair said it would focus on its airline business, while creditors would be paid according to the probable liquidation dividend determined in accordance with the provisions of the Companies Act through:

  • The sale of non-core assets;
  • Any equity capital raised and/or;
  • The issuing of shares.

The target date for this is 31 October 2020, the practitioners have indicated.

It is likely that the existing shareholder base will be substantially diluted as part of the restructuring plan.

The business rescue practitioners intend to have substantially implemented the plan by 31 March 2021, at which point the company will be handed back to the board of directors and management.

Now read: Domestic flights in South Africa are allowed from Monday – but there is a big problem

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What will happen to Kulula and when it will start flying again