Transport industry experts have slammed the government for giving the South African Airways a R5-billion guarantee, labelling as being the decision anti-competitive.
The Treasury this week awarded the R5-billion guarantee to the ailing state-owned airline on Tuesday to enable the airline to borrow in the financial markets to acquire new planes. The guarantee is one of many SAA bailouts totalling R18-billion the airline has received since 2004. University of Johannesburg transport management department head Jackie Walters said the R5-billion guarantee the state had given SAA went against aviation policies. “It is unfair for the government to give SAA R5-billion because one of the policies of aviation states that competition in the sector should be equitable,” Walters said. “No company in the sector should be given an unfair competitive advantage.” Walters said it was unfair for the rules to be different for certain industry players. “Company like SAA and maybe it is time to look at whether South Africa needs to own a company that is so resource-draining,” Walters said. He said the R5-billion should rather have been used to upgrade the country’s struggling public system. Yesterday, Comair airlines CEO Erik Venter said the company had an obligation to challenge further government support that would benefit SAA’s domestic operation. “We understand that SAA has to rely on its shareholder to the extent that it is required to deliver a public service, in this case servicing routes that are not commercially viable for private airlines.”
“But this does not apply in the domestic market, or even on many routes into Africa where South African based airlines are attempting to compete against SAA.”
SAA had accumulated losses of R17-billion since deregulation in 1992. Over this period nine of the 11 private airlines competing with SAA had failed. In 1992, on deregulation of the domestic airline industry, the government developed an aviation transport policy intended to govern the behaviour and funding of SAA in a competitive domestic environment. This included the provisions that SAA was not allowed to cross-subsidise domestic with international operations, and that it could not receive government funding or guarantees as long as private competitors were required to rely on commercial funding. Consumer Fair chairman Thami Bolani also accused the government of giving SAA an unfair competitive advantage. “When will SAA become self-sustainable and operate like other commercially-viable airlines?” Bolani asked. Source: http://www.sowetanlive.co.za
