The share price of JSE-listed aviation group Comair Limited shot up by more than 20% by close of trade on Friday, after it announced that it would be getting R1.1 billion from state-owned SAA. This follows a settlement deal being reached over an anti-competition case dating back 14 years.
It’s a major windfall for Comair, which operates kulula.com and British Airways in SA, but comes as a further financial blow to cash-strapped SAA.
Comair advised shareholders of the settlement with SAA in a Sens statement, which relates to a damages claim served by Comair against SAA in respect of the national airline’s anti-competitive travel agent incentive schemes.
In the Sens statement, Comair said it was pleased to advise shareholders that it has entered into a full and final settlement agreement with SAA. The settlement agreement was made an order of court by the Supreme Court of Appeal (SCA).
“In terms of the Settlement Agreement, SAA will pay Comair a settlement amount of R1,108,040,000 plus interest. The settlement amount will be made in accordance with a payment schedule commencing on 28 February 2019 and terminating on 28 July 2022, or earlier should SAA elect to make payments earlier than agreed,” it said.
In addition, SAA will pay Comair’s taxed legal costs incurred to date. Both Comair and SAA will withdraw the appeal and cross-appeal currently pending before the SCA.
SAA’s settlement with Comair follows the South Gauteng High Court ruling in favour of Comair in its damages claim in February 2017. Comair declined to comment further on Friday.
In its response to Moneyweb queries over the weekend, SAA spokesman, Tlali Tlali, had a conciliatory tone, saying “the finalisation of this case marks the conclusion of one of the disappointing legacy matters, which has dragged on for far too long and was overdue”.
Tlali notes: “The current airline leadership at board and executive management level is committed to closing all legacy issues and to start on a clean slate. This case was one of the unnecessary and yet protracted legal battles, which only served to maximise risk exposure for the airline. The SAA/Comair dispute could and should have been handled differently.”
He adds: “The current SAA leadership will act decisively on matters that must be finalised to ensure that there is mitigation against any possible liability that may arise from any legacy issues. The finalisation of this matter is a deliberate decision by SAA, to clean up and focus on transforming the airline as it undertakes the journey towards financial sustainability. The airline must execute its strategy without being distracted by legacy issues in order to reach a break-even point by the end of financial year-end 2021.”
Tlali says SAA is on track in implementing its turnaround strategy, with the national airline “making good progress” and has already met a number of targets it has set in the implementation path.
While the settlement brings a final end to the 14-year spat, it represents a double financial blow for SAA by Comair within six months. In October Comair announced it would cease giving SAA Technical millions of rand in aircraft maintenance business due to poor service from SAA. It planned to move its aircraft maintenance offshore and partner with Lufthansa.