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SAA's R5bn bailout unfair says Comair

Comair is keenly awaiting details of the state's R5bn guarantee for SAA and plans to take the matter to court if it believes the terms of the bailout will contribute to unfair competition in the domestic airline industry.
Comair's chief executive Erik Venter said on Wednesday that the latest bailout of SAA by government was "the last straw". He said Comair did not take action the when the government gave SAA financial support because it was assured that it would be the last time. It now seemed that state funding of SAA was open-ended.

SAA received a R1.3bn subordinated loan last year and a R1.6bn going concern guarantee before that to underpin its cash requirements.

Venter said Comair had obtained legal advice to support a possible court challenge over the R5bn bailout on the grounds that it represented a change in government policy dating back to the early nineties in the absence of any consultation with stakeholders about the change.

The policy related to government's assurances that it would maintain "a level playing field" in the airline industry which was the basis on which Comair was launched.

He said it was it was a matter of survival for independent operators that state support for SAA be challenged as such support could give SAA's domestic airline operation a competitive advantage. The failure of nine of the 11 private airlines that have attempted to compete with SAA showed the impact that SAA's state support has had‚ especially as it continued to make losses.

The state guarantee would allow SAA to borrow money to buy a new fleet or aircraft but Venter said privately owned airlines did not have this luxury and had to fund acquisitions from cash flow.

Meanwhile the Democratic Alliance said it would request a meeting with Public Enterprises Minister Malusi Gigaba to discuss the "devastating impact" of continued SAA bailouts on private airlines.

"While the move will grant the state enhanced oversight powers‚ it still perpetuates the unfair advantage afforded to the national carrier at the expense of private airlines‚" DA spokesman on public enterprises Natasha Michael said.

"A R5bn guarantee is still R5bn more than any private airline is getting. SAA get the leeway to operate with relative impunity. It is still not fair."

Michael said it was an indictment of SAA that a technical committee of officials from National Treasury and the Department of Public Enterprises would monitor its financial position and its implementation of a turnaround strategy.

"What an indictment for SAA that the state has to employ a nanny to watch over it‚" she added.