Velvet Sky goes into liquidation

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Grounded airline Velvet Sky has been placed under provisional liquidation, after a ruling by the Pietermaritzburg High Court on Friday. Trade union Solidarity warned that the airline faces going down the same road as liquidated Aurora Empowerment Systems and advised Velvet Sky employees to start looking for other jobs.

In the Pietermartizburg High Court on Friday, presiding judge Shyam Gyanda dismissed an application by Umzamo Transport Services (which is owed R3.9 million by the airline) to implement a business rescue plan, as the application did not provide enough detail and may have been a delaying tactic.

On Friday Velvet sky cited another possible business rescue plan in partnership with the Malawian government. “This same false promise of a foreign investor had become a monotonous strain in the Aurora saga,” Solidarity said.

Anna Annandale SC, BP’s advocate, said the airline had not explained the outcome of its previous rescue plan whilst proposing another. She said Velvet Sky was trying to delay proceedings. Gyanda agreed, saying that postponing provisional liquidation would only create false hope.

Velvet Sky’s employees had not been paid in three months and its offices have been closed over the past month, according to court papers. The airline owes around R100 million to its creditors, including R28.7 million to BP, which in February launched an application for provisional liquidation after the carrier failed to pay arrears by February 17. Flights were suspended in late February.

After Umzamo submitted its first business rescue plan, BP in March agreed to participate in it and suspended its liquidation application. Solidarity said the liquidation application by BP was set aside in March after Velvet Sky had announced that a mysterious foreign “investor” would possibly intervene to save the airline from its predicament.

Yesterday Solidarity said that Velvet Sky was headed in the same direction as Aurora, “on account of the people involved overlapping the two entities”. Gideon du Plessis, deputy general secretary of Solidarity, said that “the modus operandi of Velvet Sky and Aurora Empowerment Systems was exactly the same. I’m glad the legal system stopped them in their tracks.”

In 2009 Aurora was chosen to purchase the assets of liquidated Pamodzi Gold. It then gained control of the mines and stripped the infrastructure. Liquidators kicked Aurora out last year and are now suing the insolvent estate of Aurora for R1.7 billion, and investigating R120 million in missing gold. “This is a major corporate scandal. And it’s the same people as Aurora,” du Plessis said.

It seems that Solidarity is not optimistic as to the outcome of the Velvet Sky case, as it advised employees to register their outstanding salary claims and start looking for other jobs “without delay”.



Solidarity came up with its own proposals for dealing with Velvet Sky, including giving Velvet Sky liquidators extended powers; investigating the role-players behind the scenes and taking legal steps against them; prosecuting the directors of Velvet Sky Sky in terms of section 424 of the Companies Act; stopping liquidators from negotiating with Velvet Sky to avoid delaying tactics; and stopping creditors from entering into settlements with Velvet Sky as the airline would probably not honour them.