On instruction from Business Rescue practitioner, Dr Gerhard Holtzhauzen, attorneys’ firm Velile Tinto & Associates Inc. successfully filed for 1time Airline (Pty) Limited’s provisional liquidation in the North Gauteng High Court yesterday. The carrier’s Business Rescue process was thereby also formally terminated. Jetworx Aircraft Services (Pty) Limited, the sister company in 1time holdings, remains operational and under Business Rescue.
The Business Rescue Plan for 1time Airline was published on 22 October 2012 while the voting on the plan was scheduled for 29 October 2012, which was subsequently delayed due to important changes in the proposed financing structure.
During that period four major issues were under consideration:
1. 1time’s old generation aircraft are not nearly as fuel efficient as new generation aircraft and with constantly rising fuel costs, it put additional strain on the profitability of the airline. In the early stages of the Business Rescue process, ticket sales were on an acceptable level to sustain the airline’s daily operations but a decrease in ticket sales later on in the process also contributed to the loss of profitability and cost to keep the aircraft in the air.
2. Airports Company South Africa (ACSA), 1time’s largest creditor with a claim valued at more or less R147 million, had an overall negative attitude towards the Business Rescue process. ACSA was only interested in recovering all its debts without considering the ripple effect this might have on the airline’s operations. ACSA’s representative clearly stated at the creditors meeting that ACSA will attempt to recover all the monies owed to it. ACSA changed their policy to such an extent that 1time was forced to pay for current services in cash the day after the services was rendered during the week, and in advance over weekends and public holidays. The aforementioned payment terms constrained 1time’s cash flow and to make matters, worse the reconciliation done by ACSA set off payments received to historic debts, despite the historic claims being ring fenced. The appointed liquidators will investigate the matter further.
4. In addition to the rights issue, a major international aviation company expressed interest in acquiring the business of 1time and commenced its due diligence of the airline. The timing and transfer of the business as well as the cash requirements in the short term caused them to re-assess the variables to complete the transaction and this caused the investor to back out of the transaction.
5. On Friday, 2 November 2012 the business had an operating cash shortfall and one that would only be magnified the following week. The impact decision to ground all aircraft and suspend the service with immediate effect was taken to ensure that 1time’s safety would not be compromised, and therefore minimal warning was given to all affected parties. It was therefore decided to shut operations at 3pm.
Following the decision for the Suspension of Services of 1time Airline last week Friday, 2 November 2012, the High Court yesterday granted the company’s application for Provisional Liquidation. The provisional order has the effect that the company’s license stays in force for a limited time period which will have a benefit for interested investors to continue with the business.
In accordance with the process, the Master of the High Court has appointed provisional liquidators who will be taking over from Dr Gerhard Holtzhauzen, 1time’s appointed Business Rescue practitioner, to manage the airline with the interests of its creditors in mind. Holtzhauzen cautioned that grounded aircraft and the non-operational airline will have a negative impact on the probability to successfully revive this business.
During the period of Provisional Liquidation, the liquidators may recommend to the court that the liquidation order be lifted and the company be resuscitated or that the airline be placed in final liquidation.
The provisional liquidators are Mr Hannes Muller and Aviwe Ndyamara from Tshwane Trustees and can be contacted on email@example.com.