FlySafair has been in the news recently because of the Air Services Licensing Council and the International Air Services Council ruling that the low-cost airline is in breach of the voting rights and control requirements of SA air licensing laws.
The Air Services Licensing Act established the Air Service Licensing Council to handle the licensing and control of domestic air services. The International Air Services Act established the International Air Services Council to regulate and control international air services.
What the law says
In terms of the domestic act, at least 75% of voting rights and active control of the domestic air service must be held by a natural person(s) resident in SA. If not a natural person, then it must be incorporated in SA with voting rights held by residents of the country. The international act stipulates that voting rights in an international air service must be “substantially held” by a natural person who is a resident of SA, or, if not a natural person, is incorporated in SA with voting rights held by local residents, and “actively and effectively” in control.
FlySair ownership
The ownership of Safair Operations (trading as FlySafair) comprises 25.14% owned by B4i, a fully black-owned BEE entity with resident voting rights; 25% owned by Safair Holdings, an SA company owned by Safair Aviation Ireland, which is part of ASL Aviation Holdings in Ireland and with “Irish voting rights”; and 49.86% owned by the Safair Investment Trust domiciled in SA, of which the trustees (who are resident SA citizens) hold the voting rights.
If the councils find a licensee to be in breach of these requirements, they can tell the airline to comply within a specific period or suspend the licence with certain conditions for no longer than two years; or cancel or amend the licence concerned. An appeal is allowed to the high court. Furthermore, the councils can make an exemption to the voting rights and control requirements if the transport minister, after considering an application, directs them to do so.
Last October the international council ruled FlySafair was in breach of the international act in terms of voting rights and control, and in December the domestic council followed suit. The latter’s interpretation appears to be that only natural persons, as per the definition of the SA Citizenship Act, can have the required voting rights, so cannot be a company or trust. FlySafair has pointed out such an interpretation of the act would mean that other local airlines would also be non-compliant if companies and trusts represent more than 25% of their voting structures. The international council still has to supply its reasons for finding FlySafair in breach and both councils still have to issue sanctions.
In the meantime, FlySafair approached transport minister Barbara Creecy early in January, asking for a ministerial exemption as allowed by the acts. However, on Thursday the minister, after seeking internal legal advice, said such a step would be premature and that she would be consulting external senior counsel for further advice on the way forward. The minister’s statement pointed out that it was “not a forgone conclusion that the council(s) will simply cancel FlySafair’s licence” and that an appeal to the high court would also be available.
To obtain clarity about the legal requirements on voting rights and control, FlySafair has applied to the court to make a declaratory order to guide future decisions by the councils.
Legal battles
This is not the first time FlySafair’s ownership structure has come up with the licensing councils and the courts. In August 2013 the high court in Pretoria granted an interim interdict preventing Safair from launching commercial passenger flights after an application by Comair and Skywise Airline and based on an argument that FlySafair was effectively controlled by the Irish group ASL Aviation. After this order, Safair set up a local structure and was granted the licence.
In 2017 Comair had to defend its ownership structure in court, based on the fact it was a listed entity on the JSE. The judge ruled that only the immediate level of ownership was to be considered in interpretation of compliance with the air service licensing acts, and the “look though principle” was not to be applied.
In 2017 a process for a proposed merger between Flysafair and Airlink started. In February 2018 it was rejected by the Competition Commission and set down for a hearing at the Competition Tribunal in November 2018, but both parties called off the proposed deal in October 2018. According to Flysafair, a restructuring started for the purpose of the proposed merger, then had to be adjusted in 2019, but ASL Aviation, based in Ireland, erroneously stated in its 2020 annual report that Safair was a wholly owned subsidiary.
These statements have since been amended and the companies’ most recent 2023 financial statements specify that FlySafair’s control is vested in SA.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.