SOUTH Africa’s aviation industry is calling for a “level and fair” playing field where different carriers can operate under equal competition rules.
Comair has taken SAA to court questioning the constitutionality of government’s bailouts of the national carrier, which in 2015 amounted to over R30bn. The basis of the challenge is that current and previous bailouts do not comply with either the Domestic Aviation Transport Policy or the law. At the time of going to print, proceedings in court were underway.
What Comair is trying to achieve with legal action, according to a statement released by the Free Market Federation, is that government provide funding to SAA only after consultation with affected stakeholders. Comair also asks that any funding is in accordance with government’s Domestic Aviation Transport Policy so that the promised level playing field for domestic aviation is achieved.
Comair CEO Erik Venter said the legal action was in no way a challenge to stop all funding of SAA, nor a proposal to privatise or challenge the shareholding of SAA. “If we succeed with our action then government will have to apply a much more critical approach to assessing whether SAA can receive subsidies in the future, and this will assist in creating a more level competitive environment for all airlines, ensuring that all airlines face the same risks and the same requirements to operate on sound commercial principles. By receiving government bailouts, SAA avoids this commercial reality and this negatively impacts on all current and potential airline operators.”
Comair argued in court on May 5 that instead of going into business rescue, the technically insolvent SAA opted for bailouts. Comair legal counsel David Unterhalter SC was quoted in News 24 saying: “It is a classic position of a company that simply can’t meet its on-going obligation.” He added that the words “impact on liquidity” was simply a “nice way of saying ‘we can’t pay it back’”.
New LCC Skywise has jumped on the bandwagon. Co-Chairperson J. Malik has called for a roundtable discussion between the airline industry and Minister of Tourism, Derek Hanekom, to explore ways to “effectively work together as an industry”.
Malik told TNW he would like to see both SAA and Mango exit the domestic market and for SAA to solely focus on its international operations. South Africa’s domestic operations should be handled by local private carriers, such as Comair, Kulula and Skywise, he said. “How can we fight against a carrier that is operating with a blank cheque from the government? Let SAA carry the flag internationally and leave the domestic market to us.”
Malik added that government needed to extend its support to the domestic aviation industry by lowering taxes and airport charges, helping grow domestic tourism in the country.
“South Africa needs at least eight or nine carriers focusing solely on the domestic market. This will give the consumer more choice and will allow for a better focus on service, instead of just placing focus on particular carriers,” he says.
