Founder: Turnaround Talk
It has been barely a month since the announcement that Comair would be placed into provisional liquidation. Many South Africans have since been asking which airline would be the next one to face an uncertain future. On 13 July, the International Air Services Council has cancelled all licenses and related route rights currently allocated to regional state-owned airline SA Express with immediate effect. The reason for the cancellation was that there were concerns that the airline was not following the licensing provisions of the International Air Services Act.
We have already seen that the domestic airline industry is under severe pressure and our prediction that Comair would not be the past drama of the year proved to be correct.
SA Express went into business rescue in February 2020. It was placed in provisional liquidation since April 2020 and has not operated since. At the time of filing for provisional liquidation, the liquidators pointed out that the amount to be raised was R50 million. A sale of SA Expresses few tangible assets in 2020 raised about R30 million. In March this year, the airlines liquidators announced the re-opening of the bidding process.
Now there seems to be a war of words with strong accusations being made about the airline implying that some parties did not act in good faith. Subheadings were inserted by Turnaround Talk.
Worst nightmare
“Our worst nightmare has finally come true … It is very clear now that the liquidators and the Department of Public Enterprises (DPE) had no intention to save the airline,” SA Express and the SA Cabin Crew Association (SACCA) said in a joint statement on Thursday. “If the liquidators and DPE had pure intentions to save the airline, [they] would have made sure the licences and the routes remained.”
The News24 article points out that The Fly SAX consortium, made up of former employees, offered R5 million for the intangible assets of SA Express, which essentially comprised the licenses and related routes.
SA Express went into business rescue in February 2020. It was placed in provisional liquidation since April 2020 and has not operated since. The court date to determine whether it must be placed in final liquidation has repeatedly been postponed in the hope of concluding a viable sale.
The liquidators indicated in 2020 that the amount to be raised was R50 million. The sale by the liquidators of the airline’s few tangible assets at the time raised about R30 million.
The loss of its licences means it has no intangible assets left either. Up to that point, the liquidators were still trying to sell the airline’s licences as intangible assets. Repeated attempts since then to conclude a sale of the airline had failed.
Yet, Fly SAX and SACCA believe there is still hope to salvage the licences and related routes of SA Express if there is swift action. They say they are ready to run a new airline along with the right investor.
“There’s a huge need for a regional airline,” they claim.
A massive loss for creditors
Tabassum Pardesi, CEO of Uprise Aviation and transactional advisor to Fly SAX, told News24 that the loss of licences is a big loss for the creditors of SA Express and the aviation industry. She too blames the liquidators for not accepting the Fly SAX offer of R5 million for the intangible assets of SA Express.
The joint liquidators, however, said in a statement on Thursday evening that they take objection to what they regard as defamatory and incorrect allegations being made by Fly SAX and SACCA.
“Together with the DPE, we made various submissions to the Air Services Council to extend the licences and routes allocated to SA Express pending the sale process that would see a buyer being able to purchase the shareholding and/or the incorporeal assets, thus retaining jobs and continuing in the market,” said the liquidators.
Photo By: Wikiwand
Legal stipulations
The SA Express liquidators point out that the Air Services Act stipulates that a licence issued by the council is only valid for a period not exceeding 12 months from the date of the issuing of the licence and that the operation of the air services cannot be interrupted for a period of more than a year. Furthermore, it states that a licence will lapse as soon as the estate of the licence holder is sequestrated and/or wound up.
The liquidators say an attempted sale process was concluded at the end of June (2022) and did not result in securing a buyer who was able to pay the purchase price and/or offer the purchase price with the reserve of R10 million.
The liquidators claim they did all within their powers to retain value for the benefit of the entire body of creditors of SA Express.
Good for the profession?
Once again, we are seeing the same old narrative that the business rescue/liquidation process takes a long time to be finalised or implemented and there is a significant lack of trust – or communication – between the parties. This is not doing the business rescue profession any favours. And if one assumes, like with Comair, that SA Express will not be the last airline to face financial difficulties and liquidity issues, surely there needs to be some element of good faith, or else nobody will trust the business rescue/liquidation process any longer.
