SAA loans ‘in line with state mandate’

Lawyer for bank slams Comair position on bailouts

PRIVATE airline Comair yesterday took more technical punches in its court battle against South African Airways.

In the Pretoria High Court, SAA was backed by Nedbank, Standard Bank and CitiBank, which granted it multibillion-rand loans.

Comair, the British Airways franchisee that operates low-cost airline Kulula.com, approached the court in 2013 in a bid to stop the government bailouts to the national carrier.

This was after SAA was granted a R5-billion loan guarantee for two years on the basis that it would implement a turnaround strategy. Last year, as the repayment deadline approached, SAA instead sought more funding and was granted an additional R6.5-billion injection by Finance Minister Nhlanhla Nene.

Throughout the week, Comair’s lawyer David Unterhalter told the court that the decision to grant the bailouts impacted negatively on the aviation industry, stifled competition, and contravened various aviation policies and laws.

Advocate Jeremy Gauntlett, representing the finance minister, made it clear SAA was in a “dire” position and the bailouts were necessary and in line with the state’s mandate.

Comair’s suggestion that future bailouts should go through a parliamentary and judiciary process was scoffed at by Bruce Leech, representing Standard Bank.

Leech said: “This [application] is commercially unsustainable, you can’t have a loan that must then be subject to a court procedure. This application is trying to supplement the oversight of parliament with the oversight of the judiciary.”

The court has been told SAA would not be able to repay the loans and was technically insolvent. Yesterday, Unterhalter said: “When a guarantee is issued to a party that cannot pay and is certain to fail, that is tantamount to a grant.”