FlySafair, a low-cost carrier, has been accused of having an unfair advantage over its competitors, which may have allowed it to capture 60% of the South African aviation market. The airline has operated a slick business over the past decade, operating in an aviation market where margins and profits are shrinking like economy-class legroom. However, market forces have led to FlySafair's becoming a big airline, with at least 11 airlines permanently grounded in South Africa since FlySafair started flying in October 2014.
FlySafair's growth is believed to be attributable to an unfair market advantage, making it difficult for competitors to compete with the airline on an equal footing. Airlink and Global Airways, which co-own the domestic airline Lift, have approached the International Air Services Council and the Air Services Licensing Council, urging the local aviation authority to probe FlySafair's ownership structure and determine whether it complies with legislation. Safair Operations is believed to be FlySafair's parent company.
The central complaint by Airlink and Global Airways is that foreign investors/shareholders predominantly own Safair, thus breaching South African laws and licensing conditions. The Air Services Licensing Act requires that holders of aviation licenses in South Africa have a minimum of 75% local shareholding, which includes voting rights over how airlines are managed. The International Air Services Act requires airlines based in the country and flying overseas to have a "substantial" local shareholding, which the airline industry has interpreted as a minimum of 51%.
Airlink and Global Airways argue that Safair no longer complies with the Air Services Licensing Act because individuals based in South Africa do not hold the airline's voting rights and shareholding structure. They 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.
The storm over the ownership of FlySafair/Safair dates back to 2013 when competitors Comair and Skywise dragged it to court. Safair was then forced to change its ownership structure to have local ownership, creating the South Africa-based Safair Investment Trust. In March 2019, the trust was cancelled when ASL Aviation Holdings bought it and acquired its shares.
Airlink and Global Airways have requested the local authority to intervene and force Safair Operations to remedy its shareholding structure to reflect more local owners/shareholders. The local authority could cancel or suspend Safair's aviation license, impose fines or penalties against FlySafair, or give FlySafair more grace by possibly selling shares in the company to locals. The local authorities want the playing field to be levelled and the law to apply to all aviation players equitably. They believe that being majority-owned by foreign shareholders gives FlySafair access to international capital that the airline uses to fund its operations and growth, allowing it to remain competitive.
An industry source told Daily Maverick that other SA airlines should also be allowed to open up their shareholding structure, considering that international aviation giants such as Emirates and Qatar are keen to invest in local airlines. The laws currently prohibit global investors from investing in local airlines, so the rules should be changed to allow them to attract foreign investors.
Kirby Gordon, the chief marketing officer at Safair, said the company believed it was compliant with all ownership-related laws and had been transparent about its ownership structure. He said the challenge is for councils to reaffirm that the structure complies with the regulations they have before them.
