Pretoria - The government continues to pour money into South African Airways (SAA) and it uses state funding to aid the insolvent SAA to act in an uncompetitive and non-commercial manner.
This is according to arguments delivered in the High Court in Pretoria on Tuesday on behalf of commercial airliner Comair, in which it is challenging the government’s bailout of SAA.
The government granted SAA a R5.5-billion bailout on condition that it developed a turn-around strategy. Yet two years later SAA again sought a bailout from the government, Judge Hans Fabricius was told.
Comair is asking the court to declare the decision by the government to bail out SAA as unconstitutional and unlawful and to set aside the decision to grant the R5.5bn aid.
The applicant viewed the financial assistance, (in the way of guarantees) by the government to SAA as not being compliant with domestic aviation policy.
Comair does not want to stop all the financial assistance to SAA, but wants the court to put guidelines in place as to how this should occur in future.
Comair, in asking the court to review and set aside the decision by the government to grant the R5.5bn “guarantee” to SAA, said the setting aside should be suspended for six months. If the government during this time decided to grant financial assistance to SAA, it should do so according to guidelines set out by the court in its judgment.
The two front rows of the court were on Tuesday occupied by an array of legal eagles, including some of the country’s top advocates. While Comair engaged the services of David Unterhalter SC, the government, which includes the ministers of Public Enterprises, Finance and Transport, engaged the services of five senior advocates. This included well known Silk Jeremy Gauntlett.
Unterhalter told Judge Fabricius it was common cause that SAA couldn’t meet its debts. It was in a “spiralling debt cycle” where it made more debt to meet other debts.
He said SAA either had to be placed under business rescue, or Parliament must decide to recapitalise it.
But the manner in which the government was at present bailing out the airline was unlawful, he said. SAA will not “topple over” under the remedy Comair is asking, he argued, as it will give it enough time to find alternatives. Unterhalter said the purpose of the public funding to SAA was to extend the life line of a failing state entity.
Judge Fabricius commented that what “concerned” him was that it was not clear what Comair wanted.
“How can you complain about unequal treatment if you don’t say what treatment you want?” he asked.
Erik Venter, chief executive of Comair, said in a statement to court that because of its undisciplined commercial behaviour, SAA had repeatedly driven itself into serious financial difficulties.
He said the bailing out of SAA by the government allowed it to continue operating in this manner.
Pretoria News