ENOUGH IS ENOUGH: State support for national carrier SAA needs to be challenged, says Comair CEO Erik Venter. Picture: SIMPHIWE NKWALI.
ENOUGH IS ENOUGH: State support for national carrier SAA needs to be challenged, says Comair CEO Erik Venter. Picture: SIMPHIWE NKWALI.

JSE-LISTED airline 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 bail-out will contribute to unfair competition in the domestic airline industry.

Comair CEO Erik Venter said on Wednesday the latest bail-out of SAA by government was the last straw. He said Comair did not take action the last time government gave SAA financial support because it came with the assurance 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.

He said Comair had obtained legal advice to support a possible future court challenge to the R5bn bail-out on the grounds 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 promises 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 a matter of industry survival that state support for SAA be challenged, if it served to 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 effect of SAA’s state support, especially as for many years it continued to make losses.

The state guarantee for two years would allow SAA to borrow from the financial markets to acquire its new fleet, but Mr Venter said privately owned airlines did not have this luxury and had to fund acquisitions out of their cash flow.

Meanwhile, the Democratic Alliance (DA) said it would be requesting a meeting with Public Enterprises Minister Malusi Gigaba to discuss the "devastating impact" of continued SAA bail-outs 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 spokeswoman for public enterprises Natasha Michael said.

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

Ms Michael said it was an indictment of SAA that a technical committee of officials from the Treasury and the Department of Public Enterprises would be established to monitor SAA’s financial position and progress with regard to developing and implementing the turnaround strategy.

"What an indictment of SAA that the state has effectively had to employ a nanny to watch over the implementation of its turnaround strategy," she said.