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Johannesburg, Tuesday 17 September 2013: Comair and Skywise have issued court papers against Safair Operations and the Air Services Licensing Council (ASLC), applying for an interim interdict preventing Safair from commencing to operate its scheduled air service, pending a review of the decision by the ASLC to grant Safair a scheduled license. The application is expected to be heard by the Pretoria High Court on 01 October 2013.
Global trade is governed by bilateral trade agreements, whereby countries agree on reciprocal trading rights in order to prevent the economic dominance and invasion by the strong economies over the weaker economies. Were such reciprocal trade agreements not in place, the strong economies would be able to extract all benefit from the primary, secondary and tertiary sectors of weaker countries, depriving the weaker countries of investment potential, job creation and economic advancement. Therefore, while the globalisation of trade continues, it is not entirely free because the interests of a country go beyond its trading, and there is not yet global freedom for the labour force to follow the national beneficiaries of global trade.
Just as countries protect the ownership of their mineral resources and marine territories, so too is the air space of a country regarded as a national asset. The rights of foreign owned airlines to operate scheduled air services into other countries are regulated by treaties called Bilateral Air Service Agreements (BASA) which stipulate on a reciprocal basis, the frequency of flights and/or the number of passengers that can be carried on such flights. In the case of South Africa, these BASA’s are negotiated by our Department of Transport with the aviation authorities of foreign states. Before a foreign owned airline can operate into South Africa it must be “designated” by the Department of Transport to do so. The South African International Air Services Council licenses South African airlines that wish to operate routes between South Africa and foreign destinations.
In order to protect their economic interests and ensure the proper oversight of the airlines licensed and regulated by a particular state, almost all countries have placed a restriction on the foreign ownership in locally licensed airlines. So just as foreign companies cannot freely mine our natural mineral resources or freely fish in our marine territory, foreign airlines also cannot freely operate in our territory. The South African Air Services Licensing Act No 115 of 1990 states that no licence may be granted for scheduled passenger services unless the applicant satisfies the Air Services Licensing Council (ASLC) that 75% of the shareholding in such entity is held by persons who are ordinarily residents in South Africa, and that such persons must have active and effective control of the airline. This means that such persons must carry the risks and rewards associated with the airline.
Recently, the relevant South African authorities did not favourably view an application by the Tanzanian Airline, Fastjet to be exempted from the 25% restriction on foreign ownership of South African air service licence holders. In order to gain access to the South African domestic airline market, Fastjet was planning to purchase 100% of the shareholding in the insolvent airline, 1Time. In light of resistance to their efforts to obtain such an exemption, Fastjet eventually abandoned its application before a final decision could be made by the Minister of Transport and the ASLC.
Comair believes that the same principles and similar objections should apply to the Safair scheduled licence application. The real risk, present in the precedent set by the granting of a scheduled air service licence to Safair is that it will allow large foreign aviation companies to enter the South African domestic airline market by setting up “front” companies but where in reality the majority financial and operational control of the airline does not resort with South African residents. The precedent will allow more substantial global airlines to set themselves up in South Africa and extract the economic benefit of our air space, without our own airlines having reciprocal legal rights. The use of South Africa as a flag of convenience by foreign airlines will tarnish South Africa’s image when negotiating for route rights with other countries.
Comair welcomes private competition in the South African aviation market, but still prioritises the achievement of a level playing field, both domestically and globally, as the most fundamental requirement to the long-term sustainability of the industry. The failure of so many domestic airlines, to the detriment of the public, the industry suppliers, and the image of the industry, is a direct result of all airlines not facing the same competitive and commercial risks. Failure to protect the national interest of South Africa’s air space rights will exacerbate this situation, as well as potentially give away the economic value of South Africa’s air space to other countries.
Comair Limited is a South African aviation and travel company, offering scheduled and non-scheduled airline services within South Africa, Sub- Saharan Africa and the Indian Ocean Islands, as its main business. The company operates under its low-fare airline brand, kulula.com, as well as under the British Airways livery, as part of its British Airways Plc. licence agreement. Managed and owned by South Africans through its listing on the JSE, Comair has been operating successfully in this country since 1946. Comair is the only known airline to have achieved operating profits for 67 consecutive years and has a safety record which is internationally recognised.
For more information on Comair, visit www.comair.co.za
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