Irish-run discount airline FlySafair licenced to operate in SA

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After being delayed by legal objections from local airline Comair, the new cut-price operator FlySaFair was today given the green light by the Regulator. This followed a reshuffle of its shareholding from 75% to only 25% Irish-ownership. Is it a mere sleight of hand or genuine? Comair's CEO Erik Venter isn't sure. – AH

ALEC HOGG: Low-cost airline FlySafair was this week granted a domestic, scheduled passenger license by the Air Services Licensing Council, after failing to meet restrictions on foreign ownership last year in October.  Joining us on the line for more is Erik Venter, Chief Executive of Comair.  Erik thanks for giving us your time.  You were not very happy about the potential for FlySafair to come into the market, and raised an objection.  Are you comfortable now that all the boxes have been ticked?

ERIK VENTER:  Well thanks, Alec.  We're not quite sure what the structure is now.  They have abandoned their original shareholding structure and they've implemented a new one, which involved a number of trusts holding the shares.  Our concern of course, is just that if the previous structure was based on the fact that 75 percent of the shares were held by foreigners, would those same shareholders suddenly turn around and say 'well, it's not a problem.  We'll just hold 25 percent and you can carry on'.  It just doesn't seem to be a typical move that a shareholder would do, just to give up 50 percent of their shareholding.  Having these trusts in place does give us a lot of concern.  We can't really see through the trusts.  The purpose of a trust is usually to separate the beneficiaries from the people controlling the trust and therefore, we believe there's a very high likelihood that while the beneficiaries of the trust might be local, ultimately, what we're still seeing here is that there's foreign control of this airline.

ALEC HOGG:  Are you going to take it further?

ERIK VENTER:  Well, we are awaiting the detail of the decision by the Licensing Council so we can understand how thoroughly they've investigated the matter.  We suspect that it hasn't been adequately investigated and that they've granted the license simply on the basis of who the beneficiaries of the trusts are, so we want to see how they took their decision.  If we feel they haven't done adequate work in seeing through these trusts, we'll take it on review.  Ultimately, it still comes back to this issue of the fact that as South Africans, we're not allowed to invest or run airlines in foreign countries and therefore, we have to protect our airspace from foreigners coming in and running the airlines in South Africa.  If it were at all reciprocal, we wouldn't mind at all, but the risk is that it sets a precedent for even bigger airlines to come in and say 'well, here's a structure we can use to set up an airline in South Africa'.  The next thing we know, we have for example, a gulf carrier operating domestically in South Africa.

ALEC HOGG:  But isn't this an opportunity?  You have been a little bit hamstrung by that inability to operate, as you say, in other countries.  Isn't this an opportunity now to say to the South African government/the authorities 'okay, they can come here…let's reciprocate'?

ERIK VENTER:  I think, certainly…  There was a huge debate on this recently between Europe and the United States for example.  The European carriers are keen to move into the United States, but in the U.S. the unions for example, are protecting the U.S. with the same ownership laws.  Everyone would like to even move to zero regulation or remain with this foreign ownership regulation, but the difficult part is 'where does one start', and someone has to take that first step.  You are however, dealing with every other country in the world individually, and there's no conglomeration of countries saying 'we're all keen to deregulate'.

ALEC HOGG:  Where do these guys come from – the people who are behind FlySafair?

ERIK VENTER:  From Ireland.  It's an Irish holding company.  It actually holds shares in South Africa, and I think that they've now basically handed over a big chunk of the shareholding to these trusts, which they claim to be South African beneficiary trusts.  It's all a bit obscure.  We – Comair – can't actually see through the trusts ourselves, so we're saying well, if the Licensing Council have that information…if they can ultimately see who's controlling the trust and they're confident that its South Africans then we have no problem with it.

ALEC HOGG:  Just in closing, there was a SENS announcement today from the late One Time airline, saying that they were still negotiating with Global Airways.  I find it difficult to understand exactly what was going on there.  Do you have more clarity?

ERIK VENTER:  No, I must say we don't really understand it either.  If you go across to the Global Airways premises, across here at the airport, it's just basically a piece of tarmac with a few old aeroplanes standing on it, so we don't really understand what the benefit of the deal is or why they're doing the deal.

ALEC HOGG:  What deal is it?

ERIK VENTER:  I don't really know.  There was talk about taking a 15 percent shareholding in Global Aviation at one stage, and then there was this group called Packair, which was supposed to be owned by the Pakistanis taking the shareholding in One Time.  There was supposed to be a cross-shareholding structure being put in place, but why they were doing it or what the benefit is, I must say I'm completely mystified.  I don't see what value there is in any of the three businesses.

ALEC HOGG:  Well, unable to shine any more light on that…  Thank you.  Thank you for the insights.

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