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Comair's application to set aside SAA bail-out is dismissed

2 Jun 2015

Pretoria High Court Judge Hans Fabricius on Monday, 1 June, dismissed Comair's application to set aside the government's bail-outs of South African Airways (SAA).

Comair's application to set aside SAA bail-out is dismissed

SAA competitor Comair challenged the financial assistance provided by the government to prop up the struggling airline.

Comair, the JSE-listed British Airways franchisee that operates kulula.com, argued the government was using the guarantees it gave to SAA as a "device" to raise funding from commercial banks and delaying the payments it would eventually make on behalf of the airline.

Comair said SAA would never be able to meet its debt obligations and was instead raising debt against fresh guarantees to pay for interest on older debt.

Legal council for Comair, David Unterhalter SC, said the Treasury was "binding the hands of Parliament" by effectively giving SAA a cash injection, without tabling the decision in Parliament.

In 2013 Comair challenged the R5bn government guarantee given to SAA and began legal proceedings against the airline. It also voiced its discontent when a further R6.5bn guarantee was given to the airline in February this year.

SAA has received more than R30bn in government guarantees and loans from the state since 1999. It has no equity and is now surviving on R14.5bn of government guarantees given to it after 2007. Its latest guarantee was given to it after it failed as a going concern, a recurring reason for guarantees.

The loss-making SAA has had nine turnaround strategies in 15 years. Four CEOs and one acting CEO have left in the past six years.

Source: BDpro

Source: I-Net Bridge

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