Summary
- Airlink and Global Airways allege that low-cost carrier FlySafair violates local ownership rules.
- South Africa’s licensing council will hear Airlink and Global’s complaints on May 10, 2024.
- FlySafair contests the claims and is confident in a positive outcome after hearings.
South Africa’s International Air Services Licensing Council (IASLC) will hear complaints by Airlink and Global Airways (LIFT) against FlySafair on May 10, 2024. This is one of many hearings regarding complaints about FlySafair’s ownership structure.
75% local ownership rules
Airlink and Global Airways, the owner of LIFT, are urging the Air Services Licensing Council (ASLC) to look into FlySafair’s ownership structure, with allegations of breaching South Africa’s foreign ownership rules. A complaint was recently brought to the ASLC. Another complaint to the IASLC was heard on April 11, but the council is set to reconvene for deliberations on May 10. Speaking about the potential outcome of the hearing, FlySafair Chief Marketing Officer Kirby Gordon said to Simple Flying,
“Airlink and Global have lodged complaints about our ownership structure, and one of the hearings will be held tomorrow. Various subjects have been prepared for discussion, but it seems likely that additional information is still being prepared and shared, so we are not likely to see a specific outcome just yet. We remain confident in a positive outcome.”
Photo: Tatenda Karuwa | Simple Flying
The competitors allege that FlySafair is predominantly owned by foreign investors and shareholders, contravening the Air Services Licensing Act, which governs South African domestic carriers, and the International Air Services Licensing Act, which governs South African carriers flying internationally. With flights to nine domestic and six international destinations, the low-cost carrier is subject to both acts.
The domestic act requires operators to have at least 75% of local shareholding, while the international act requires a “substantial local” shareholding, which the industry has interpreted to mean at least 51%. Airlink and Global Airways argue that FlySafair does not comply with the Air Services Licensing Act because its voting rights are not held by individuals in South Africa.
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Previous claims by other competitors
FlySafair has been operating in South Africa for nearly ten years. The airline recently returned an annual mega sale to celebrate its tenth birthday. Back in 2013, when the carrier first applied to operate commercial passenger flights in South Africa, the now-defunct Comair and Skywise objected the application citing that ASL Aviation Holdings, an Irish company that owns Safair, did not have the required domestic shareholding.
Photo: Thiago B Trevisan | Shutterstock
In turn, ASL established the Safair Investment Trust registered in South Africa, in which 49.86% of the shareholding was vested. The company also established an employee share-ownership scheme, with a 25% shareholding in the company. This meant the company attained the required domestic shareholding, so it was granted a license.
However, as reported by Daily Maverick, the trust was canceled when ASL Aviation bought it and acquired its shares in 2019. As such, ASL increased its share capital in Safair from 25% to 74.86%.
Suspending FlySafair’s license
We are yet to see the final outcome of the hearings. Over the last ten years, FlySafair has grown significantly, capturing about 60% of the domestic market. It flies to all major cities in South Africa and a few other regional destinations, with a fleet of 34 Boeing 737s. There have also been multiple reports of competitors urging the licensing council to suspend FlySafair’s license. However, such a decision would severely impact the local air transport and tourism sectors.
Photo: FlySafair
FlySafair believes it complies with the ownership rules, with at least 75% local shareholding. In an interview with eNCA, Kirby Gordon said the complaints about the airline’s ownership structure are akin to a “price war slowly going nuclear.” According to Gordon, this started with a complaint to the Competition Commission a few months ago by LIFT, which accused FlySafair of predatory pricing.
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The matter is still under investigation by the Competition Commission. The low-cost carrier was accused of charging prices that were too low, which it believes is untrue. With that particular case not gaining traction, FlySafair’s competitors are now challenging the basis of its license and ownership structure.
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