South African carrier Comair requires a substantial cash injection and is unlikely to resume operations until at least November.
Its fleet will also be reduced to 16 aircraft, comprising 13 Boeing 737-800s and three spare 737-400s.
The airline’s business rescue practitioners have outlined the situation to creditors and employee representatives.
Although South Africa’s government has started easing restrictions on air transport, Comair would need to cover multiple costs and obtain agreements for fuel supply, all of which it would “not be able to meet” without a “significant” capital infusion, they state.
Comair is also unable to fund a planned acquisition of its joint-venture Nacelle, formed with IT firm Infinea two years ago.
Nacelle was established as a specialised separate technology venture to provide IT-related operations and support services.
Comair had agreed to acquire Infinea’s 50% shareholding before entering business rescue, but will have to pay for the acquisition through instalments, over 17 months, when it obtains funding.
Discussions are under way with six potential lenders to recapitalise the carrier, after more than 30 possible funding sources were contacted, the practitioners state.
“In terms of the restructuring plan, it is likely that the existing shareholder base will be substantially diluted,” they add.
Cirium fleets data lists Comair as having 21 aircraft, comprising 14 737-800s and five -400s plus a single 737 Max and a 737-300. The airline also has an associated low-cost division, Kulula, with a 737-800 fleet.
The practitioners’ proposed business plan, based on 13 737-800s, appears to drop the Boeing 737 Max from the airline’s operations. Along with its single stored 737 Max 8 the carrier has orders for another seven.
“It was considered that a downsized fleet would be more in keeping with what the company could afford to operate, and demand for air travel [following the coronavirus] crisis,” the carrier says.
Employees have been put on unpaid leave and retrenchment proceedings are continuing. The practitioners intend to have the rescue plan “substantially implemented” by the end of March 2021, at which point control of the company will be given back to the board.