FlySafair faces potential grounding as the Air Services Licensing Council (ASLC) has confirmed that its shareholding structure breaches local regulations. The Air Services Licensing Act mandates that domestic airlines must have at least 75% of their voting rights owned by South African residents.
As per ASLC, the ASL Aviation Group, an Irish holding company, holds 74.86% of FlySafair, making it the airline's majority shareholder. This ownership structure has resulted in FlySafair violating South African and international air services licensing regulations. The issue arose due to formal complaints lodged by Airlink and Global Aviation (operator of LIFT), prompting an inquiry that began in October 2022.
The ASLC has reiterated its stance, interpreting the law to mandate individual (natural person) shareholders for compliance, thereby excluding corporate entities and trusts. FlySafair contends that this interpretation is impractical, as few individuals have the necessary capital to own an airline. The airline has cautioned that this stringent interpretation of the law could also threaten the compliance of other major carriers.
If FlySafair, which controls around 60% of the domestic market and runs up to 160 flights daily, were suddenly removed, it would overwhelm other airlines, leaving passengers stranded and causing major delays in air travel. With few alternatives available, ticket prices would likely increase, imposing extra financial pressure on consumers and possibly limiting access to affordable travel. This situation could also discourage tourism, hindering an industry already recovering from the disruptions of 2020 and 2021.
The possible suspension of FlySafair has sparked worries about wider economic impacts. The airline raised concerns about the risk of job losses and lasting harm to South Africa's aviation industry, which is vital for the nation's connectivity and economic development.
Tourism, a major contributor to South Africa's economy, could face substantial setbacks if there is a reduction in affordable and dependable domestic flights. To tackle this problem, FlySafair has taken legal steps by requesting a declaratory order from the courts to clarify the interpretation of ownership laws.
Furthermore, FlySafair has reached out to Transport Minister Barbara Creecy, seeking an exemption from the controversial legal provisions as their court applications are being reviewed. The minister's office has confirmed receipt of the request, indicating that it is being evaluated in collaboration with legal advisers and within the context of the broader regulatory framework.
FlySafair is hopeful that the minister's decisive action could address the issue, highlighting the importance of a reasonable interpretation of the law to ensure the sustainability and growth of South Africa's aviation sector. The ASLC's decision poses a threat to FlySafair and establishes a precedent that could impact the operations of other airlines.
If the council's position is maintained, the aviation industry might encounter considerable instability. Airlines could be compelled to reorganize ownership to adhere to the law, a procedure that might be both time-consuming and expensive. FlySafair's situation highlights the pressing need for regulatory clarity to ensure the stability of the aviation sector.
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