Kulula owner accused of using sale to raise cash one day before stopping flights

Angry Kulula.com ticketholders have accused the airline’s operator of using a sale on Tuesday to raise capital a day before it grounded flights.

Comair — which operates Kulula and British Airways flights in South Africa — shocked the industry with the unexpected announcement on Tuesday evening that it had suspended all flights, effective immediately.

The company said it was forced to halt operations because it required additional funding.

“The company’s business rescue practitioners have advised that the process to raise the necessary capital is in progress and that there is reason to believe such funding may be secured,” Comair said.

It offered Kulula ticketholders affected by flight cancellations a full refund or credit for future bookings, while British Airways flyers would be accommodated on other airlines, where possible.

Comair’s airlines account for roughly 40% of the low-cost flight market in South Africa.

Several ticketholders vented their frustration at the decision, asking why Kulula continued to sell tickets while it was aware of its liquidity issues.

“You guys have known about this for some time now. So why did you continue to sell tickets knowing you couldn’t provide the service?” said Martin Stabrey.

Jacques Botha pointed out that Kulula had offered a winter warmer sale with up to a 30% discount on flights between 31 May 2022 and 30 November 2022.

Comair denied it was using the money raised from the sale to fund its operations in a response sent to MyBroadband. 

It explained the sale had been planned and implemented a week ago.

“Once it became evident that our operations would need to be suspended, we closed the sale,” the company stated.

“Importantly, Comair does not receive the cash from sales until the air service is provided, so the cash is safe for passengers to claim a refund.”

Comair CEO Glenn Orsmond also told Bruce Whitfield’s The Money Show that the cash was safe and assured passengers would be refunded.

Poor corporate governance

The Institute of Directors in Southern Africa (IoDSA) also released a statement in the wake of the uproar, criticising poor corporate governance on the part of Comair.

“At this stage, it is not clear whether this was simply a disastrous example of the left and right hands not knowing what either was doing or an indication of a more serious ethical breach. But either way, irate customers are putting the blame on the board and the CEO,” said Parmi Natesan, IoDSA CEO.

IoDSA said the most likely scenario was that the marketing and sales team introduced the promotion to get more passengers into Comair’s planes to make up for revenue lost when the airline’s licence was suspended in March.

“Because the CEO and his or her executive team are responsible for day-to-day operations, the board would probably not have known the specifics — like the date of the sale — of this operational activity,” the institute stated.

However, it believes the senior management, as the link between the board and operational teams, should have briefed the relevant decision-makers to be cautious during a period of financial instability.

“Whatever the truth of the matter, one thing is clear: Comair has aggravated one of its most important stakeholder groups — its clients — and if it does return to service, the board will have its work cut out to repair a severely damaged reputation alongside all the other challenges it faces.”

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Kulula owner accused of using sale to raise cash one day before stopping flights