Court interdict prevents FlySafair operations

FlySafair flights, which were due to start on October 17th, have been suspended due to legal action. The courts yesterday granted an interdict which forces the Safair licence application to be reviewed by the Air Services Licencing Council. This is as a result of questions being asked about the true ownership of FlySafair.

Passengers are protected in that they can obtain a full refund, or elect to travel on Comair for the same price.

This, and the fastjet episode, once again highlight the strict regulatory regime which exists in Southern Africa.

Whilst we cannot predict the final outcome of the FlySafair chapter, the fact remains that it is a diificult tightrope to walk between encouraging competition versus protecting the travelling public from risky business ventures. If one looks further North in Africa, the results of uncontrolled airline proliferation can clearly be seen. That road is littered with failures and accidents. And indeed, South Africa also has a high proportion of domestic airline failures.

South African civil aviation law requires a local ownership portion of 75% in order to obtain a domestic air services licence. This is not an uncommon provision, and it would be argued that this is an equitable policy, considering that competing nations have similar rules.

Given this, why are there few new entrants. Clearly, local investors fully understand the dynamic of the South African domestic air market. The structural problems created by the existence of 3 state-subsidised, loss-making airlines, are the root cause.

In the meanwhile, the incumbents enjoy outstanding profits due to the uncompetitive nature of the majority of the major routes.