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Tuesday, September 17, 2013

■ SOUTH AFRICA: Comair, SkyWise launch legal bid to block FlySafair's launch.

Following through with its threats of legal action, Comair Ltd and now startup, SkyWise, have dragged the Air Services Licensing Council (ASLC) to court in a bid to block the launch of the Safair's nascent low cost subsidiary, FlySafair (FA), due to commence flights between Cape Town and Johannesburg later this year.

According to South African business wire, BusinessDay, the move follows the recent dismissal by the South African Air Services Licensing Council of an objection lodged by Comair that Safair did not meet the minimum statutory requirements for the establishment of a domestic South African carrier, which caps foreign ownership at 25%. 

In their high court petition, Comair CEO, Erik Venter, and Skywise CEO, Rodney James, are seeking to overturn the ASLC's ruling arguing that as a subsidiary of Irish aviation group, ASL, Safair does not comply with the ownership structure set down in the Civil Aviation Act, which stipulates that airlines must be 75% owned by South Africans.

It is claimed that ASL circumvented the requirement by handing 25% shares to each of three local executives - ASL’s group CEO Hugh Flynn, Safair CEO Dave Andrew, and Safair chief financial officer Elmar Conradie - and that their class of shares is "inferior" to that of ASL's in that Mr Flynn, Andrew and Conradie don't receive dividends, have lesser voting rights and can be bought out by the senior shareholders. Further to this, it is claimed that Mr Flynn does not qualify as a "South African" under terms of the Civil Aviation Act as he is resident in Ireland.

The plaintiffs claim that Safair is being used as "front" for foreign investors and that should FlySafair be allowed to operate, it would set a dangerous precedent that would pave "the way for the likes of Emirates and Virgin Atlantic" to enter the local market with little or no benefit.

In response, Mr Conradie questioned Comair’s motives, suggesting the court action was simply an effort to hold on to their market share.

2 comments:

  1. The gist of the article is right, but the important allegation missing is that the 75% handed over the the South Africans consists of a class of shares that is inferior to that of ASL (they don't receive dividends, have worse voting rights and can be bought out by the senior shareholders).

    The application is due to be heard on the 1st October - it's going to be interesting.

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    1. Thanks for that - have fixed the article accordingly.

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