Flysafair competitors hoping to clip its wings
Airlink and Global Airways Operations say that foreign investors/shareholders predominantly own Flysafair, thus breaching local laws. By
Does low-cost carrier Flysafair have an unfair advantage over its competitors, which might have paved the way for it to capture 60% of the local aviation market?
The answer – especially from the vantage point of Flysafair’s competitors – is a resounding yes.
Flysafair has managed to run a slick business over the past decade, operating in an aviation market in which margins and profits are shrinking, like economy-class legroom since air travel has evolved.
Market forces have also led to Flysafair morphing into a big airline. At least 11 airlines have been permanently grounded in South Africa since Flysafair started flying in October 2014. More recently, the Covid pandemic was the final nail for SA Express, Mango Airlines, Kulula and British Airways in southern Africa. South African Airways emerged as a smaller airline after its operations were rehabilitated under business rescue.
As these market changes unfolded, Flysafair has managed to mop up the flight capacity left open by the collapse of its competitors, allowing it to increase its market share. However, its competitors believe that Flysafair’s growth is also attributable to an unfair market advantage, which has made it difficult for them to compete with the airline on an equal footing.
And now, Flysafair is under investigation for being (allegedly) predominantly owned by foreign players, which could be in breach of licensing conditions and local aviation laws. Aviation companies Airlink and Global Airways Operations (which co-owns the domestic airline Lift) have approached the International Air Services Council, urging the local aviation authority to probe Flysafair’s ownership structure and determine whether it complies with all legislation. A company called Safair Operations is believed to be the parent company of Flysafair.
Arguments of Flysafair’s competitors
The central complaint by Airlink and Global Airways, set for hearing on 10 May, is that foreign investors/shareholders predominantly own Safair, thus breaching the Air Services Licensing Act and the International Air Services Act. The Air Services Licensing Act requires that holders of aviation licences in SA have a minimum of 75% local shareholding. The International Air Services Act requires airlines based in the country and flying overseas to have a “substantial” local shareholding. The airline industry has interpreted this to be a minimum of 51%.
Airlink and Global Airways argue that Safair no longer complies with the Air Services Licensing Act because the airline’s voting rights (and by extension, its shareholding structure) are not held by individuals based in South Africa.
Daily Maverick understands that Airlink and Global Airways have detailed the shareholding and voting rights structure of Safair Operations to the International Air Services Council, which they say is as follows: 25% is held by a company called Safair Holdings, 25.14% is held by B4i Safair and 49.86% is held by a trust.
Daily Maverick also understands that Safair Operations has admitted that 25% of the voting rights held by Safair Holdings are not held by residents of South Africa. Airlink and Global Airways believe that the 49.86% that is held by a trust is opaque.
The requested remedy
Airlink and Global Airways have asked the International Air Services Council to intervene to force Safair Operations to remedy its shareholding structure to reflect more local owners/shareholders. The local authority could cancel or suspend Safair’s aviation licence until its shareholding structure is fixed, impose fines or penalties against FlySafair or give Flysafair more time to fix its shareholding structure by possibly selling shares in the company to locals.
Airlink and Global Airways want the playing field to be levelled and for the law to equitably apply to all aviation players. They believe that being majority-owned by foreign shareholders gives Flysafair access to international capital that is used by the airline to fund its operations and growth, allowing it to remain competitive.
Kirby Gordon, the chief marketing officer at Safair, said the company believes that it is compliant with all ownership-related laws and has been transparent about its ownership structure.
“How our company is constituted is transparent… The challenge at hand is for the councils to reaffirm that the structure complies with the regulations that they have before them. I say reaffirm because our structure has always, by regulation, been disclosed,” said Gordon.
“For the last 10 years, we’ve built an airline doing good, honest business and offering the best possible value to our customers… While we believe that we are compliant with all requirements, we’re also happy to make any adjustments needed to bring all parties comfort so that we can get back to the business of offering a world-class air travel solution,” he added.
Airlink and Global Airways … believe that being majorityowned by foreign shareholders
gives Flysafair access to international capital that is used … allowing it to remain
competitive