Comair, the only independently owned airline competing with SAA in the domestic market, has launched a legal challenge in the high court against the government’s R5 billion guarantee for loans taken out by the national carrier.
Erik Venter, the chief executive of Comair, said yesterday that official government policy and legislation were in place governing the operation of SAA as a state-owned entity and its competitive relationship with the rest of the aviation industry.
He said: “The current and previous bailouts, which now amount to over R11bn, do not comply with either the domestic aviation transport policy or the law – the constitution, the South African Airways Act, the Promotion of Administrative Justice Act and the Public Finance [Management] Act.
“We regret that we have had to resort to legal action to achieve compliance and have not done so lightly. However, we have no other recourse,” Venter said.
He stressed that this action was “not a challenge to stop all funding of SAA, nor an attempt to shut down SAA”.
“It is an action to ensure that the government will provide funding to SAA only after consultation with all affected shareholders in line with the Promotion of Administrative Justice Act and that any funding is in accordance with the government’s domestic aviation transport policy.
“Comair’s sole objective is to attain a level playing field in the domestic aviation market to ensure that all airlines face the same risks and the same requirements to operate on sound commercial principles. By receiving government bail-outs, SAA avoids this commercial reality and this negatively impacts on all current and potential airline operators.”
Venter said he appreciated that SAA’s management had announced a strategy to turn the loss-making national carrier around but said there was concern that “there have already been eight prior plans and this one has a 20-year time horizon”.
“This is unacceptable in an industry where private capital competes with a state-owned enterprise. Comair cannot afford to see this plan unfold over another 20 years.
“A 20-year plan would furthermore absolve anyone of ultimate responsibility to deliver the plan,” he said.
Public Enterprises Minister Malusi Gigaba asked the government last year, as the sole shareholder in SAA, to inject new capital into the airline to fund the acquisition of a modern fleet that would enable it to compete on level terms with other international airlines.
Gigaba pointed out that the soaring cost of fuel was making it necessary for airlines to replace fuel-guzzling older aircraft with new generation models using less fuel and causing less pollution and in some cases their shareholders were providing capital to enable them to do so.
Since then South African low-cost airline 1time, which was unable to afford to replace its uneconomic fleet, has stopped operating and is in provisional liquidation.
Comair’s latest action was triggered by a government decision to allow SAA to use part of the Treasury’s R5bn loan guarantee to pay its current fuel bill to prevent the suspension of services.