Comair-SAA in court battle over state bailouts 

Kulula
Low cost, lots of fun: Image taken from Kulula.com’s Facebook page.

(News24) – Comair’s legal challenge against government’s bailouts of state carrier South African Airways (SAA) is due to start this week. The case will be heard in the Gauteng North High Court in Pretoria from May 5 – 7, according to the Free Market Foundation (FMF).

Private airline Comair, a franchise partner for British Airways — and also operates the low-cost airline brand kulula.com — launched the court challenge in February 2013 following the government’s then bailout of R5bn.

In October 2012 the government granted SAA a R5bn guarantee for two years. One of the conditions was that SAA’s board had to develop a turnaround strategy. SAA told Parliament in February 2012 it needed between R4bn and R6bn for a recapitalisation programme.

In October 2014 SAA again sought government support. Then in January 2015 Finance Minister Nhlanhla Nene announced that SAA will receive another R6.5bn injection from state coffers. This was after he said in his mini-budget in October 2014 that SAA would not be bailed out and instead be restructured to become financially sustainable.

According to Comair CEO Erik Venter the court case was launched because the airline regarded the bailouts and certain other government payments to SAA as not compliant with the Domestic Aviation Transport Policy or the law.

Venter said Comair is not seeking to stop all financial support of SAA or to shut or privatise the airline, but was asking that assistance be in line with domestic transport policy to minimise the impact on other operators. “Comair seeks to challenge the constitutionality of government bailouts to a state owned airline competing with private operators in SA domestic aviation sector,” said the FMF in a statement on Monday.

“The basis of the challenge is that current and previous bailouts do not comply with either the Domestic Aviation Transport Policy, the Constitution, the Public Finances Management Act (Paja), the Promotion of Administration Act or the SAA Act.”

According to the FMF Comair wants the government only to provide funding to SAA after

Source
http://www.fin24.com/Companies/Industrial/Comair-court-challenge-of-SAA-bailouts-coming-to-a-head-20150504

 

 

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