South Africa’s Velvet Sky in renewed liquidation threat

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Velvet Sky once again faces liquidation proceedings after a court deadline to file its recovery business plan passed without any sign of progress, and BP Southern Africa renewed its threat to pursue litigation and enforcement action.

The domestic South African airline, which grounded its fleet on 27 February, remains embroiled in a legal dispute with BP over an outstanding fuel bill for 29 million rand ($3.6 million).

Pietermaritzburg High Court had set a deadline of 10 April for supplementary papers to be filed in support of Velvet Sky's emergency business plan. But the date passed without announcement, and BP now tells Flightglobal: "We intend to proceed with the pending litigation and enforcement of our rights if the matter remains unresolved."

The renewed threat of liquidation comes after details emerged of Velvet Sky's troubled relationship with its lessors, both of which have taken possession of their aircraft and claim they are owed money by the airline.

Aergo Group says that leases on three Boeing 737-300s it had placed with Velvet Sky were terminated on the day of the airline's grounding. "This was due to non-payment of leases, significant arrears on which payments plans were not adhered to, and the fact that Velvet's insurance policies lapsed on this date," it says, adding that further dealings with the carrier's management team would be "difficult".

The airline also defaulted on a lease for a McDonnell Douglas DC-9 owned by Johannesburg-based Global Aviation, which says it is owed 2.6 million rand. "We are pursuing that through the courts," chief executive Ronald Finger tells Flightglobal. "It's with our attorneys."

Velvet Sky did not respond to telephone or email queries asking about the status of its operations. The company's latest communiqué was posted on its website in early March, when it said "liquidation proceedings have ended" and flights will resume "as soon as possible".

The Durban-based carrier launched operations in March 2011, serving domestic routes between Cape Town, Durban, Johannesburg, Port Elizabeth and Polokwane.