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Comair may fall foul of licensing conditions

Airline to challenge regulator in court.

Listed airline company Comair has been given until 11 May to comply with the conditions of its Air Services License. Failure to do so could lead to the suspension of, or cancellation of the license, the Air Services Licensing Council (ASLC) told Moneyweb on Thursday.

In terms of the Air Services Licensing Act nobody is permitted to operate a commercial air service without a valid Air Service License.

In response to questions from Moneyweb the airline downplayed the risk, saying: “While the ASLC has stated that a consequence of non-compliance may be the suspension of Comair’s license, it has not notified Comair of any intention to commence the proceedings as stipulated in the Act for the suspension of an airline’s license.”

The airline also said it is preparing to take the ASLC’s decision on review “and is confident of a positive outcome.”

Comair’s licensing woes date from 2013/14 when low cost airline FlySafair, which is a competitor to Comair’s low-cost brand kulula.com, lodged a complaint with the ASLC against Comair. This was after Comair got an interdict to stop FlySafair from commencing its low-cost air service due to FlySafair’s non-compliance. FlySafair had to change its shareholder structure to be able to comply and start operating.

Licensing requirements limit the foreign shareholding and voting right in domestic airlines to 25% and FlySafair fell foul of the condition due to the double South African and Irish citizenship of one of its shareholders.

Comair stated in its 2015 annual report that FlySafair’s complaint was based on the allegation that Comair “breached the Air Services Licensing Act by failing to apply for a license amendment after undertaking a share repurchase programme and secondly that when a “look through” construction is applied to the Group’s current foreign shareholding component, the amount of this shareholding slightly exceeds the restrictions specified in the said Act.”

It said Comair and FlySafair appeared before the ASLC in September 2014 and Comair made further submissions about its shareholding on request of the regulator.

The process was interrupted in November 2014 when the term of the Air Services Licensing Council expired. New members were only appointed in March 2015.

Comair said in July last year the ASLC issued a notice “requesting it to provide within a period of 120 days some further shareholding information.” 

It said: “Following July 2015 Comair provided further shareholding information to the Council and thereafter Safair stated that it would no longer persist with its complaint.

It is however clear that the ASLC would not leave the matter at that.

“The ASLC agreed to an extended period within which Comair could address the alleged non-compliance with the Act and that period has not yet expired. Comair has made further submissions to the ASLC and is confident that it is compliant with the Act,“ Comair told Moneyweb on Thursday.

It added that while it remains in discussions with the regulator, it is also preparing to take the ASLC’s decision on review. The act makes provision for revision of ASLC decisions in the High Court.

The ASLC however puts it a bit differently.

In an official response to Moneyweb’s question the ASLC said it made a ruling in March this year to reject Comair’s submissions and sent a letter of non-compliance to Comair “which will be affected on 11 May 2016.”

According to regulator that means that Comair’s Air Services License may be suspended or cancelled if the non-compliance persists.

It confirmed that FlySafair and at least two other airlines in the past had their licenses suspended and cancelled for for non-compliance with licensing conditions.

Guy Leech, editor of SAFlyer magazine said the alleged non-compliance is a serious matter. He said Comair might be getting a bit of its own medicine after stopping its competitor FlySafair earlier due to non-compliance and lauded the ASLC for applying the same standard to all airlines. 

 

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