Jacques Keet
JSE-LISTED aviation company Comair Limited has challenged the application of the latest R5-billion government guarantee for SAA. Chief executive Erik Venter said yesterday Comair had an obligation to challenge further government support that would benefit SAA's domestic operation.
This was a matter of industry survival, and maintaining competition in the market for domestic air travel.
SAA had accumulated losses of R17-billion since deregulation in 1992. Over this period, nine of the 11 private airlines competing with SAA had failed.
Venter said this was a clear indication of the impact of SAA's assurance of state support.
In 1992, on deregulation of the domestic airline industry, government developed an aviation transport policy intended to govern the behaviour and funding of SAA in a competitive domestic environment.
This included the provisions that SAA was not allowed to cross-subsidise domestic with international operations, and that it could not receive government funding or guarantees as long as private competitors were required to rely on commercial funding.
"We understand that SAA has to rely on its shareholder to the extent that it is required to deliver a public service, in this case servicing routes that are not commercially viable for private airlines.
"However, this does not apply in the domestic market, or even on many routes into Africa where South African airlines are attempting to compete against SAA," Venter said.
The losses incurred by SAA and Mango in the domestic market could not be sustained by a private airline, and had been incurred to protect SAA's market share at the expense of its competitors and the taxpayer.
"We do not see any controls in place that will prevent this from happening again," he said.
The only way to achieve a level playing field in the domestic market would be to separate SAA's domestic operations, including Mango and SA Express, into an independent legal entity with its own leadership and transparent financial reporting.
The domestic operation would then have to operate on sound commercial principles and without any government support or indirect cross-subsidy from SAA international.
"If government fails to ensure the achievement of a level playing field, then we might return to a state monopoly for domestic air travel, which is exactly what the aviation transport policy was designed to avoid," Venter said.
On Tuesday, the Treasury said the government had granted the guarantee to SAA for two years, starting from September 1.
SAA had requested recapitalisation, at an estimated cost of between R4-billion and R6-billion. This would enable the airline to strengthen its balance sheet and order new planes. – Sapa
