Shake-ups in SA aviation – South Africa Airways snubbed

Speculation is rife about which southern African airline Middle Eastern carrier Qatar Airways plans to invest in. And it’s not SAA.

Qatar Airways investment

On Wednesday, the airline’s chief executive officer Badr Al-Meer said the company’s intends to take a significant stake in a sub-continental airline in the coming weeks at the Qatar Economic Forum. This after a source close to the South African delegation alleged that SAA was actively canvassing both the Qatari prime minister and Qatar Airways to line up as a strategic equity partner. The response was unfavourable for the state-owned carrier.

Al-Meer said that there are only two or three southern African airlines worth investing in.

Aviation analyst and editor of SA Flyer Magazine Guy Leitch said that it was impossible to make any assumptions, but in a radio interview on Wednesday evening he suggested that Qatar might look either north or east of the Limpopo with a possible Zimbabwean or Mozambican airline in its crosshairs. Leitch ruled out a South African investment noting the 25% foreign ownership limitation.

Leitch previously told The Citizen that the foreign ownership limitations are antiquated and should be disposed of because it throttles growth in aviation. Industry insiders agree, saying that a capital-intensive sector that creates thousands of jobs should not be deliberately excluded from receiving foreign direct investment of any size.

On Fly Africa an industry commentator wrote: “The legislation in question is in urgent need of review and modernisation to better align with aviation industry standards and competitive practices.”

In an ongoing saga FlySafair continues to appear before the domestic and international licensing councils for its alleged opaque foreign and local ownership structure. In a submission by competitor Lift, it was suggested that FlySafair’s majority ownership lies in Ireland at shareholder ASL Aviation Holdings, holding more than the allowed quarter of issued equity.

However, FlySafair’s Kirby Gordon told The Citizen that the airline’s structure is public record and “is before the councils for review. We remain confident in its compliance but gladly submit it to the council for their interpretations of the regulation”.

The case is a reprise of the 2013 Comair challenge to FlySafair’s ownership where Judge Tuchten was not very complimentary about FlySafair. In the judgment, he wrote: “To my mind, the strongest consideration in the assessment of balance of convenience is that there is a high degree of probability that Safair is indeed in fraudem legis (circumvention of the rules of law) in relation to the requirements of effective control.”

Judge Tuchten said that had the licensing council appreciated the true facts regarding FlySafair’s ownership structure at the time, “the decision would not have been made in favour of the respondent (FlySafair to operate as a commercial airline), a court should in my view lean towards forthwith putting an end to such illegal conduct”.

In 2014 FlySafair reciprocated but failed to challenge now defunct airline group Comair’s shareholding when the regulator attempted to suspend the airline. Comair had it overturned in court.

Media reports suggested that Lift owner Global Aviation and Airlink are after FlySafair’s suspension and thus, customers and concomitant commercial benefits. But there was no evidence in Lift’s submission to the council, a public document, that this was the case. Gordon corroborated the lack of evidence and instead said that a journalist had approached him with “source information” that this was the two competitors’ intent.

A staffer close to the matter at Global said that the council was simply requested to consider all remedies available to it. “It’s up to council to decide on sanctions not us. I think it’s going to be a long process,” they said. Sanctions on a negative verdict could include suspension, fines, or licence cancellation.

Qatar Airways has been increasingly active in investing in other African assets. The carrier is expected to acquire a 49% stake in Rwanda Air and a 60% stake in a new Kigali airport that is under construction. The announcement into southern African aviation comes hot on the heels of the failed, seeming three-year tagalong acquisition of SAA by the Takatso consortium.

It is unlikely that Qatar’s investment would take shape as another SAA suitor, it said as much this week, and Public Enterprises Minister Pravin Gorhan would have been compelled to announce it. SAA could not be drawn for comment on whether the carrier and its shareholder are actively canvassing new strategic equity partners.

Cemair’ s Miles van der Molen denied that it was his company that’s being courted. Gordon denied that FlySafair was about to be bagged by anyone else and Air Zimbabwe and LAM, the Mozambican carrier, could not be reached for comment. Gidon Novick of Lift said that “it’s not us”.

Rumours that Airlink might be the target were doing the rounds. Rodger Foster, chief executive of the airline, said that the carrier holds relationships with many role players. “Airlink cannot speak for Qatar Airways.  It is one of over 30 valuable global airline partners with which Airlink has commercial partnerships of various shapes, form, and depth,” he said.

He added that Airlink is continually searching for new opportunities to grow “and it is in this context that we frequently engage in discussion with our various commercial partners”.

Southern Africa, said Foster, is a lucrative market and it is recognised that the country holds plenty of potential.

Source: The citizen