/ 26 February 2013

Comair wants input on SAA bailouts

Comair Wants Input On Saa Bailouts

Comair has launched a court application to attempt to compel government to consult with the aviation industry before awarding any further guarantees or bailouts to national carrier South African Airways.

JSE-listed Comair said the action was motivated by the R5-billion guarantee announced in October last year, which it said brings to R11-billion the assistance given to SAA. This application is separate to other actions raised by it and other airline companies, which are still active.

Comair chief executive officer Erik Venter said at a press conference on Tuesday that this would be the eighth plan to assist the struggling SAA and that this latest guarantee formed part of a 20-year plan, which was not competitive.

He said this assistance is in contravention of, among others, the Domestic Aviation Transport Policy and laws including the South African Airways Act and the Public Finances Management Act.

The legal challenge is not intended to halt funding to SAA, or to encourage privatisation or to shut down SAA but is to ensure that there is consultation between government and the affected stakeholders in the aviation sector before more financial assistance is given to SAA, he said.

Venter said opportunity for this is covered in the Promotion of Administrative Justice Act and in accordance with government’s Domestic Aviation Transport Policy.

Demise in industry
Venter said: "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 bailouts, SAA avoids this commercial reality and this negatively impacts on all current and potential airline operators.”

Comair is the last remaining independent and privately owned domestic scheduled airline operation and has a responsibility to its employees, customers and stakeholders, he said.

"Comair … has concern that there has already been eight prior plans, and that 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 entire plan,” said Venter.

Comair refers to the views of economist and aviation expert Joachim Vermooten, who said that the R5-billion guarantee enables SAA to artificially increase its scope of operations and sustain losses as a result of not operating on a commercial basis, as is required by existing government policy.

The aviation section has seen the demise of 10 out of 11 independent private airlines since regulation in 1991.