Comair heads for court over SAA guarantees

Comair intends to argue that the R5bn guarantee and the cumulative R11bn that has been given to SAA since 1991, which marked the start of the deregulation of the domestic aviation market, goes against the Domestic Aviation Transport Policy and runs counter to provisions in the SAA Act, the Promotion of Administrative Justice Act, the Public Finance Management Act (PFMA) as well as the constitution.

Venter said policies put in place throughout the 1990s, which cut across both the apartheid and democratic administrations, were designed to encourage the participation in the aviation sector by the private sector but the state had not abided by its own policies with a steady stream of financial bail-outs to SAA.

SAA's behaviour, in the face of harsh market forces such as steep fuel price increases or other external market shocks, was often "irrational" as its response or lack of response to changes in its operating environment were not associated with any real risk since it was able to rely on the state for support, Venter said.

The troubled airline - which earlier this month had to suspend acting chief executive Vuyisile Kona after the board decided it needed to investigate possible contraventions of the PFMA - is in the process of drafting a long-term turnaround strategy for the airline. The turnaround strategy was a condition of the Treasury extending the guarantee to the airline.

Venter said the presentation last week by SAA management and board members to the portfolio committee on public enterprises on the turnaround strategy had indicated to Comair that SAA had no tangible plan to alter its operations.

In the absence of key actions needed to fundamentally alter the airline's performance Comair had decided it was now more necessary than ever to take the government on over the guarantee.

"They have a 20-year plan and that is probably worse than not having any plan at all. We were even more concerned (after the presentation)," Venter said, adding that a plan with a 20-year horizon could not hold the current management accountable for turning the airline around.

Venter said Comair hoped a ruling would emerge from the court case that would oblige the state to consult all stakeholders in the aviation industry on any further funding of SAA and that the funding would be line with the state's Domestic Aviation Transport Policy.