Comair To Challenge South Africa Airways Over Government Guarantees

Comair

VENTURES AFRICA – Comair on Tuesday said it would file papers later this week in the North Gauteng High Court (Pretoria), challenging the government’s R5 billion ($567 million) guarantee extended to its loss-making competitor, South Africa Airways (SAA), last year.

Erik Venter, CEO of Comair, which operates British Airways flights and low-cost airline kulula in South Africa, confirmed this, saying the company intended to argue that the R5 billion ($567 million) guarantee went against the Domestic Aviation Transport Policy of the government.

Comair is also going to challenge the cumulative R11 billion ($1.2 billion) that has been given to SAA since 1991, which marked the start of the deregulation of the domestic aviation market.

Venter told Business Day that policies put in place throughout the 1990s, which cut across both the apartheid and democratic administrations, were designed to encourage the participation in the aviation sector by the private sector.

“But the state had not abided by its own policies with a steady stream of bail-outs to SAA,” Business Day quoted Venter as saying.

Venter said SAA’s behaviour, in the face of harsh market forces such as steep fuel price increases or other external market shocks, was often “irrational”. He said SAA’s lack of response to changes in its operating environment were not associated with any real risk since it was able to rely on the state for support.

Earlier this month, SAA suspended acting CEO Vuyisile Kona after the board decided it needed to investigate possible contraventions of the PFMA.

The troubled company is in the process of drafting a long-term turnaround strategy for the airline. The turnaround strategy was a condition of the Treasury extending the guarantee to the airline.