‘Crash and Burn’: Comair’s last hours

THIS is an extract from Crash and Burn: A CEO’s Crazy Adventures in the SA Airline Industry by Glenn Orsmond, giving an insider’s tale of the South African airline industry over the past 30 years. Orsmond was at the helm when Comair – which operated Kulula and British Airways – crashed despite the company’s 75-year unblemished profit history.

EXTRACT

In the week leading up to what would be our last day, there was no panic in the ranks. We had pulled through so many crises before, and while we knew month-end would be tighter than usual we had not given up the fight.

On May 31, 2022, Comair’s last day, a bad omen was an early-morning report on our exco chat group notifying the team that an aircraft taking off from Lanseria had experienced a bird strike. Enough blood and guts would be found in the engine that we would be able to claim from our insurers.

The aircraft was diverted to OR Tambo International and landed safely.

A month-end was always tight. Invariably it took a lot of juggling from CFO Kirsten King, who engaged charmingly and firmly with suppliers to ensure we could meet our obligations.

Kirsten was always honest to a fault. When negotiating a deferred payment date with a supplier, she would never make a promise unless she was certain she would be able to honour the deferred payment. Our suppliers trusted her implicitly and she never let them down. But regardless of her efforts, by midday it was clear that this time we had reached a bridge too far.

We would not be able to honour any deferral commitments to the key aeronautical suppliers we needed to keep us flying – the fuel companies, the Airports Company of South Africa, which runs several airports, and Air Traffic and Navigation Services (ATNS). The other suppliers could be juggled around as they would generally accept a deferment as long as we committed to a fixed payment date.

If we had secured the disputed BA payment, it might have swung it for a few days – keeping us flying and giving us time to come up with an alternative plan. But I can’t in clear conscience swear to this.

Maybe we could have stretched it out for a day or two until either Acsa or ATNS grounded us. Perhaps we could have committed to a payment date a week or so later to keep flying on a wing and a prayer. But we couldn’t honestly ask our suppliers for new payment deferment dates without knowing we would be able to honour them.

To put it in perspective, the R120 million we needed translated to six days of sales. A fine margin between success and failure. Even a six-week overdraft facility would have seen us over the hump and out of the low season.

Early that afternoon, it was clear we had no more wiggle room. With heavy hearts, Kirsten and I advised the business rescue practitioner (BRP) that we needed to suspend flight operations.

Fate had somehow determined that the decision to end the company’s life after 75 successful years would be mine. In any other organisation, management would call an emergency board meeting because making a momentous decision to suspend operations exceeds the authority of executives.

Unfortunately, though, there is no functioning board to turn to when a company is in business rescue.

Alternatively, an urgent meeting would be called with the company bankers about the temporary facility required. In our case, however, the banks had been clear: there would be no deferments and no temporary overdraft facility. Our shareholders’ position was also firm: not a cent more. They had exceeded the call of duty. Salaries had been ring-fenced, so all staff were paid for May on the final day. The BRPs controlled the bank accounts, so those with their fingers in the honey jar also got paid in full. The consultants and legal advisers got their cuts and the BRPs secured their hard-earned final fee.

Once the enormity of our decision set in, safety became our paramount concern as we navigated the business towards its final landing. We had 14 aircraft in the sky when we made the call to suspend operations. If the development became known at that point, we could not predict how our aircrew and other suppliers might react – and this created a real safety risk. Similarly, if we stopped selling tickets, news of this would spread to our crew, triggering the same risk.

As chance would have it, a few weeks earlier we had planned and implemented a normal month-end discounted price promotion. We realised now this might create a negative perception after the event but there was a bigger risk that cancelling the promotion during the day would create panic among our staff.

Continuing the sale on the day was not done to allow us to accumulate cash but to ensure we did not compromise the safety of our crew and passengers. I knew passengers who bought tickets on that day would not lose their money, and British Airways and the credit card companies subsequently refunded these sales in full in accordance with ticket purchase rules.

We had to keep this decision to suspend operations in a tight circle for about six hours before communicating it to employees and the market.

Our final flight of the final day landed in Cape Town at 10pm and a few minutes later we announced that all Comair flights were being suspended, marking the end of a 75-year success story. The press statement alluded to it being a suspension subject to securing additional funding but we all knew it was over. There was no path back to the sky. Every possible door had been slammed shut.

Much like pilots in command during a crash situation, when faced with the reality of our “financial crash” we focused on what we needed to do; there was no desire or need to display emotions. There is no proper or dignified way to end a business. We instinctively knew there would be no encore, so we issued the final press release and went home. A few days later, the notice of Comair’s provisional liquidation was published.

* Crash and Burn is published by Jonathan Ball Publishers for the suggested retail price of R310.