SAA’S LICENCE IN DANGER OF SUSPENSION

Carrier has been given 90 days to come up with the required relevant documentation

THE AVIATION industry could shrink even further if the national carrier’s operating licence is suspended by the Air Servicing License Council for material breaches, which could lead to the escalation of ticket prices as the remaining airlines compete for large passenger demand.

The council has issued the South African Airways (SAA) with a notice to provide it with three relevant documents within 90 days on the disposal of its majority stake to a private party, Takatso Consortium, failing which SAA’s operating licence could be suspended.

This comes after SAA failed to notify the council of the transaction more than a year after it was initiated and announced by the Department of Public Enterprises.

Business Report (BR) reached out to SAA for comment, but by the time of going to print it had not replied.

SAA, Lift, and FlySafair remain the only domestic airlines available to a growing aviation market due to the termination of Covid-19 travel restrictions after Comair went bust while low-cost carrier, Mango, is close to being liquidated.

In a letter send to Rosemary Ramakgapola, the Aeropolitical Affairs Manager at SAA on August 3, which BR has a copy of, the council said it suspected on reasonable grounds, that SAA had failed to comply with the Air Services Licensing Act. The council was advised that SAA was at the pre-closing stage of the transaction and would commence with concluding the regulatory processes.

However, the council placed on record the material breaches of the provisions of the act, which included the failure to notify the council of the transaction with Takatso Consortium.

It said furthermore the transaction which it had engaged in, which would result in SAA not being actively in control of the air service was a direct breach of the Act. It also needed the shareholder approval in terms of the Public Finance Management Act so that the council was afforded an opportunity to ascertain SAA’s compliance and/or non-compliance with the provisions.

“Upon conclusion of the said assessment, (the) council shall in accordance with Section 16(3) of the act, communicate in writing, a date for a meeting with yourselves to discuss the findings of the said assessment,” it said.

The second breach was that the guaranteed amount was insufficient.

“Regulation 6A provides that a licensee who operates a Class I air service must submit to the satisfaction of (the) council, a guarantee for the total sum of cash receipts of tickets which have already been sold, but which have not yet been rendered by it – which guarantee must be a fair representation of its projected cash flow,“it said.

The council said that the Consumer Guarantee it had received, dated September 23, 2021, was in the council’s reasonable opinion, not a fair representation of SAA’s projected cashflow.

The third material breach and offence was the changes of “postholders”, namely the chief executive and so on.

The council said SAA had new executive members but had not followed the due process of notifying the council.

The fourth breach was the management of accounts. It needed a set of audited Annual Financial Statement of the most recently completed financial year certified by SAA’s auditor or the chief executive.

The council asked SAA to ensure the timeous submission of the documents requested