The options for the recovery of funds lost in the contravention of foreign shareholding in the country by FlySafair Airline would have to to include either the State, through amendments, taking over the low-cost carrier, the South African Revenue Services (SARS) calculating the amount of tax lost and the South African Reserve Bank (SARB) invoking legislation of money transfers on the matter, analysts have said.
This is as FlySafair has launched an interdict against the International Air Licensing Council (IASLC) possible sanctions expected to be announced later this month.
The IASLC found FlySafair to be in contravention of foreign ownership restrictions through a 74.86% effective shareholding by Irish firm ASL Aviation Group.
“Safair’s company structure comprises 49.86% shareholding by the Safair Investment Trust, which is one of three shareholders of Safair, which is eventually 100% owned by ASL Aviation Holdings,” according to company records.
“This is additional to the 25% shareholding that is also eventually owned by ASL Aviation Holdings, making the total shareholding of Safair by ASL to 74.86%; ASL effectively holds 74.86% in Safair through Safair Investment Holdings.”
Asked of the options if FlySafair was grounded, independent aviation analyst Phuthego Mojapele yesterday said the State would have to consider taking over the 74% stake in the airline over a five-year period to recover what is has lost through the repatriated profits made in the country as the local partners of the airline would not have the capacity to redeem the loss.
“Money went out of the country to Ireland. So several things will have to be considered including bringing in the SA Reserve Bank to invoke legislation on the money transfers and even SARS to calculate how much has been repatriated,” Mojapele said.
“The thing is that in the AOC (Airlines Operator Certificate) declarations, there were obviously declarations made through the Commissioner of Oaths and the courts that have not been found to be untrue. It is all in the government’s hand and what options until Safair can regularise themselves.”
Meanwhile, IASLC chairperson Nomveliso Ntanjana said the council had not yet been asked to file responses to the interdict and would still go ahead to make its decision later on this month.
“The court ruling on the interdict can only have an impact if an order or ruling is made. The interdict process through court leaves a couple of days before the Council makes its ruling, so we will see what happens,” Ntanjana said.
The recent decision pertains only to FlySafair’s international routes and does not affect domestic flights, which are regulated under a different licence.
However, another challenge is pending before the domestic Air Services Licensing Council (ASLC), which regulates the licensing of domestic air services.
In a statement, FlySafair disclosed that competitors have raised objections to its interdict, acknowledging that these positions may reflect business interests.
It urged all parties to consider the potential impact on travellers should FlySafair not be allowed to operate its international routes, warning that limiting this could lead to higher fares and disrupt travel plans, especially with increased demand during the upcoming summer holiday period.
Mojapele said if FlySafair is grounded, it would likely throw 60% of the international aviation business up in the air for competitors, particularly over the looming festive season.
“I think competitors want to have the Council decision made as soon as possible so they can adjust their plans, particularly for the festive season,” Mojapele said.
“If that decision is made, yes there would be price increases but it is not as bad as it was when Comair and Mango disappeared from the skies.”
He also pointed out that disruption had to be managed for the aviation industry and tourism market.
FlySafair has said it was engaging with the relevant authorities to mitigate any negative impact on travellers and has backup plans if needed.
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