Pretoria - Private airline operator Comair’s court challenge on the constitutionality of repeated government bailouts for South African Airways (SAA) was dismissed by the High Court in Pretoria on Monday.
In a very brief judgement, handed down in less that two minutes, Judge Hans Fabricius said the Comair application was dismissed and no order pertaining to costs was given.
Last month., Comair urged the court to grant an order declaring unconstitutional and unlawful the government’s decision to give loan guarantees to the troubled national airline.
David Unterhalter SC, for Comair, told the court that due to the perpetual government bailouts, the “technically insolvent” SAA was charging unviable rates to the detriment of private players in the industry.
“My lord, there are a variety of alternatives which, when there is a company which is trading in insolvent circumstances and is not a going concern, save for these constant renewed guarantees that are offered. It should either go into business rescue which is a disciplinary process or into harbouring,” Unterhalter had argued.
“If there must be a recapitalisation of SAA, which is only the financial provision short of a business rescue then that must take place because it (SAA) is grossly undercapitalised and financial injections are being made into the company over the years. What appears to be recurring is that they are taking short-term remedial action through giving these guarantees in circumstances which we say are unlawful.”
He said the disadvantage of bailing out SAA was that the entity would continually seek future financial assistance.
“It is evident that the levels of losses incurred by SAA demonstrate that the SAA is not operated or operating within the discipline of the market on a sound commercial basis as required by the SAA Act, and the domestic air transport policy. It is further clear that SAA is not able to conduct its business in such a manner as to yield an appropriate return on assets employed, or to produce a dividend for the shareholder,” said Unterhalter.
“The provision of the R5 billion guarantee under those circumstances enables SAA to continue to operate outside its mandate to operate on a commercial basis and cause harm to private sector competitors, including Comair.”
The respondents in the matter included minister of public enterprises as first respondent, minister of finance as second respondent and SAA as the fifth respondent.
Comair stated that it had operated in the South African airline industry since 1946. The court documents indicated that Comair carried an average of 4.8 million passengers per annum locally and regionally with aircraft branded under the British Airways and Kulula.com colours.
ANA