S.Africa’s aviation industry at risk of losing domestic investment - CNBC Africa

S.Africa’s aviation industry at risk of losing domestic investment

Southern Africa

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North Gauteng High Court interdicted FlySafair from starting operations in South Africa.

“We have a regulatory environment in place but if it’s not going to be adhered to, then we really don’t know what we are facing in the future. In that case, why would we take the risks of investing in South Africa’s aviation industry?” Erik Venter, chief executive officer of the South African airline company, Comair, told CNBC Africa.

This follows after reports that the North Gauteng High Court interdicted, FlySafair, an Irish based airline belonging to ASL Aviation Group, from starting operations in South Africa.

Comair teamed up with another domestic airline, Skywise, to launch a joint application to the High Court for an interim interdict preventing FlySafair from starting its air service until there is a review of the decision by the Air Service Licensing Authority to grant FlySafair a licence.

“The issue we have is that the licence issued to Safair is in contravention of the licencing act of South Africa regarding the ownership content, particularly the local ownership requirement of 75 per cent,” explained Venter.

According to South Africa’s licencing requirements, which are based on global practices, foreign entities may not own more than 25 per cent of a domestic airline.

FlySafair are claiming that three South Africans own 75 per cent of the company, however, Comair believes that this may not be the complete truth.

“On the face of it, they appear to hold 75 per cent of the shares but those shares only have one vote to every ten votes to the Irish shareholding company so effectively the shareholding is reversed and their local shareholders only have 23 per cent of the voting rights and the Irish company have about 77 per cent,” he said

FlySafair however have firmly denied these charges.

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Another interesting fact, he added, is that the real motive behind the reason for the Irish company’s investment into South Africa is unknown.

Venter believes that ASL Aviation have an aircraft fleet in Europe that is currently not being used and want to launch operations in South Africa instead of being forced to decrease the value of the aircraft to a disposable value.

“We believe there are other motives behind launching the airline and not simply to try and service the domestic market,” he added.

On the other hand, Venter pointed out, the real issue is not really about FlySafair, but more about the principles that the licencing council need to adhere to in order to protect the interests of the domestic investor.

“Our concern is not FlySafair. It’s the case of investing in the aviation industry in South Africa. We need to have some certainty that the regulations surrounding the industry and the licence requirements are adhered to otherwise it becomes very difficult to know what our risk to exposure is in the industry,” he explained.

The South African aviation industry, he pointed out, attracts a lot of interest from domestic investors. The economic flow therefore remains within the South African economy. If regulations were changed and foreign investors were allowed in, the economic benefit would then be drawn out to foreign companies.

In addition, Venter added, South African airlines are prohibited from investing in the aviation industries of other countries. This therefore make it unviable to allow it in South Africa.

“Are we prepared to give up the value of South African air space to foreigners but we’re not allowed to invest in those foreign countries’ airlines?” he questioned.

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