South Africa’s flag carrier, South Africa Airways (SAA) is at risk of having its operating license suspended. This is following accusations of the airline’s failure to notify the Air Services Licensing Council (ASLC) that it had sold off a majority stake to a private party, as well as other administrative breaches. About a week ago, the carrier was given a 90-day notice to provide three relevant documents. Failure to do so will result in an indefinite suspension of SAA’s operating license.
ASLC explained that it suspected that the airline had failed to comply with the Air Service Licensing Act in the following ways:
- It failed to disclose the sale to the Takatso Consortium, its new strategic equity partner (SEP). This is a sale which will relinquish active control of the air service from the airline. Takatso will hold 51% of the airline’s shares, with a purchase worth 3 billion rands (176.4 million USD).
- ASLC believed that there was an insufficient guaranteed amount for the sale, considering SAA’s projected cash flow.
- SAA failed to notify the council of changes in the company’s key position holders, including the CEO.
- The airline failed to provide the council with a set of audited annual financial statements of the most recently completed fiscal year.
SAA has responded by explaining that the letter from ASLC only cites administrative, rather than operational breaches. In a press release on the airline’s website, it said it is “currently studying the contents of the letter and will be responding fully to the ASLC within or before the timeframe provided by the council”.
The carrier also assured its customers that the letter would not hamper its current and future operations, and does not speak to the quality of services it offers.
What Happens if the Airline Loses its License?
Aviation experts fear that losing its operating license could cost SAA some of its lucrative routes. One of such experts, Phutego Mojapele expressed that it is ASLC’s prerogative to ensure the routes are maintained by giving them to a South African registered company or airline.
“If they are not doing that, it is important that a regulator needs to come and ask them questions as to why are they not doing that. As to Takatso deal is concerned, it is important that the DPE (Department of Public Enterprises), which is the owner of SAA in the form of a government needs to clarify the transaction between South African Airways and the new equity partner that is coming. At this stage, we don’t have the details. And we’re not even sure whether they will meet the 90 days as required by the licensing console,” Mojapele added.
Mojapele also suggested that Takatso probably did not envisage that the acquisition deal of SAA would be so complicated. According to him, these complications are brought about by SAA’s status of being a government entity. Unlike with private entities, “there are a whole lot of regulatory processes that need to be followed.”
Other fears include price hikes in ticket prices due to the laws of economics, as there will be a fall in supply if SAA is unable to operate.
The country’s aviation sector has already suffered blows this year as low-cost carrier Mango Airlines had its operating license suspended, and Comair suspended operations due to a lack of funding. The latter was a British Airways (BA) franchisee which operated domestic South African flights in partnership with BA, and also served as a low-cost carrier under its own Kulula brand.
With these three major players now out of the cards, it is almost certain that there will be a steep hike in prices of tickets on the various routes formerly serviced by the airlines.
Sources: Simple Flying, SABC News