President Cyril Ramaphosa says lack of resources means that government is unable to assist Comair to solve its financial troubles.
Comair, which operates the local British Airways and low-cost carrier Kulula.com, announced this week that it had applied for liquidation.
The airline operator’s business rescue practitioners (BRPs) had stated they “no longer believe that there is a reasonable prospect that the company can be rescued” and suspended flights on 31 May.
The company, which had been under business rescue, blamed Covid-19, the red-listing of South Africa by other countries during the pandemic and the temporary suspension of its license by civil aviation for its struggles.
During a Q&A session on Friday, Ramaphosa was asked why government was allowing companies that contribute to the country’s economy collapse, but bail out state-owned enterprises (SOEs) such as the South African Airways (SAA).
“In the end I think it has to do with resources. The limited resources that government has and the ability to be able to support these companies broadly. With state-owned enterprises we usually just issue guarantees, but [as] of late we have actually have to sign cheques particularly for SAA as well as Eskom,” he responded.
“I have seen it happened in other countries where companies fail [and] take a view that [it is] to big to fail particular when it happened in the US.
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“They just printed money [to] make sure that the auto companies that were about to fail bankrolled and that bankrolling meant that these were almost like loans which they have to pay back because they are big cash generators,” the president added.
Ramaphosa further said he believed that government should support other sectors, not only the automotive industry, in order to retain and create jobs.
“In the aviation sector, we possibly have been supporting maybe two or three [airlines] ,which are state-owned. Could there have been a need to look beyond that? [I think] it’s a question we have got to look at.
“It is always not a good for a company to collapse and leads to the destruction of jobs. We need to retain jobs as much as we can. I have been saying to my colleagues that we need to be more industry focus as government,” he said.
Tourism Minister Lindiwe Sisulu said Comair’s liquidation was unfortunate and would have a negative impact on South Africa’s tourism.
According to Sisulu, Comair employs 1,200 people and its flight equates to about 40% of the country’s aviation capacity.
“This development is really unfortunate especially at the time when we are making progress in terms of the recovery of our sector.
“This essentially results in a limited distribution network where there is limited capacity for both domestic and international travellers to reach and explore the length and breadth of our beautiful country,” the Minister on Thursday.
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Sisulu said government was hoping that the grounding of Comair flights would not result in other airlines raising their prices.
Meanwhile, the National Union of Metalworkers of South Africa (Numsa) has been calling for the removal of Comair CEO Glenn Orsmond.
The union has also called for the current BRPs to be replaced as it was of the view that they are “incompetent”.
Numsa spokesperson Phakamile Hlubi-Majola laments that Comair employees have at times not been getting full salaries.
“The BRPs blame high fuel prices and Omicron-related lockdowns, but other airlines are operating in the same space. So, for us it is a sign of mismanagement,” she says.