FlySafair challenges foreign ownership ruling amid license threat and price concerns

Key topics:

• FlySafair faces licence threat over foreign ownership compliance

• Legal battle centers on interpretation of “ownership” vs. “control”

• Grounding risk may drive up South Africa’s domestic flight prices

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By Daniel Puchert

FlySafair owner Safair Operations is challenging a decision that its ownership structure is noncompliant with South African regulations, News24 reports.

In South Africa, the International Air Services Licencing Act limits foreign ownership of South African airlines to 25%.

However, Ireland-based ASL Aviation owns nearly 75% of FlySafair’s shares through its subsidiaries or directly.

This led to submissions from competitors like Airlink and Global Airways, which launched Lift, a competitor to FlySafair, in late 2020.

As a result, the International Air Services Licensing Council (IASLC) threatened the airline with sanctions in late 2024, which included a suspension or cancellation of its licence.

FlySafair filed an urgent interdict against the ruling, and the airline was given 12 months to resolve its ownership structure, which ends in December.

News24 reported that the airline’s challenge to the AISLC’s decision revolves around the difference in interpretation of “ownership” and “control.”

Daily Maverick reported in early 2024 that Safair Operations, the company under which FlySafair trades, is divided into three parts.

25% of the company is owned by Safair Holdings, 25.14% by B4i Safair, and 49.86% by a South African registered trust. Global Airways and Airlink claim B4i Safair’s stake is the only applicable local ownership.

Section 16.4 (c) of the Act states that if an airline is not owned solely by a natural person residing in South Africa, it must be incorporated locally and South African residents must hold 75% of its voting rights.

Therefore, Safair argued that the trust complies with the country’s ownership regulations because South African residents control it.

However, legal experts have said the law distinguishes between a juristic person — like a trust — and a natural person.

Thus, even if the trustees were proven to be South African residents, FlySafair would still not meet the 75% threshold for natural person ownership.

In an article for Daily Maverick, aviation expert Guy Leitch warned that if this interpretation of the Act were implemented, it would have devastating consequences for the South African airline industry.

Leitch said only Lift and Cemair would be considered compliant. In addition to FlySafair, neither Airlink nor South African Airways meet the “natural” person threshold.

Airlink is 25% owned by Qatar Airlines and 33% owned by a BEE shareholder, while SAA is owned by the government, which is also not a natural person.

Flight price risk

Since FlySafair is South Africa’s biggest domestic airline, flight prices could skyrocket if it were grounded due to the dispute. It accounts for around 60% of the market, carrying around 30,000 daily passengers.

South Africa’s flight prices have surged in recent years due to a lack of seats, primarily because of the bankruptcy of Kulula operator Comair.

The operator’s 2022 demise was caused by a combination of the Covid-19 pandemic and a controversial grounding by the South African Civil Aviation Authority over unproven safety concerns.

The loss of one of South Africa’s longest-lasting budget airlines resulted in the wipeout of roughly 40% of domestic seat capacity, causing flight prices to soar.

However, FlySafair remains adamant that it complies with local ownership regulations and has been since it encountered a similar issue over a decade ago.

FlySafair CMO Kirby Gordon said the airline has not received any additional foreign ownership since a restructuring that took place between 2013 and 2014.

At the time, Comair and Skywise argued that ASL Aviation Holdings didn’t comply with local ownership laws when it applied for a commercial airline licence.

This resulted in FlySafair being grounded and restructured to comply with the regulations, after which it relaunched in 2014.

This article was first published by MyBroadBand and is republished with permission.