Comair is the first local airline operator to come out and say that it wants a promise that SAA won’t be using its latest R5 billion for domestic operations.

Comair said that if SAA were to use money from the new government guarantee to fund its domestic operations, it would contravene the government’s aviation transport policy, developed in 1992.

Thus, it sought reassurance that this was not going to happen.

When deregulation of the domestic airline industry happened, government developed a policy that was intended to govern the behaviour and funding of SAA in a competitive domestic environment.

Comair CEO, Erik Venter, elaborated:

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.

We want to see a separation of SAA’s operations between domestic and international operations. This separation must be transparent and be accounted for separately.

The new guarantee should be used to finance the SAA’s international operations alone. The separate domestic operation would then have to operate on sound commercial principles and without any government support or indirect cross-subsidy from SAA international.

Venter acknowledged that SAA has to rely on its shareholder (government) to the extent that it is required to deliver a public service, mainly servicing routes that are not commercially viable for private airlines, but that this didn’t apply in the domestic market – that’s meant to be competitive.

SAA has made a total loss of some R17 billion since deregulation, Venter claimed. On top of this, 11 private airlines came and went over the same period, he said:

The failure of nine of the 11 private airlines that attempted to compete with SAA over the same period is a clear indication of the impact of SAA’s assurance of state support.

The losses incurred by SAA and Mango in the domestic market could not be sustained by a private airline, and have been incurred to protect SAA’s market share at the expense of its competitors and the taxpayer.

We do not see any controls in place that will prevent this from happening again. If government fails to ensure the achievement of a level playing field, then we might return to a state monopoly for domestic air travel, which is exactly what the aviation transport policy was designed to avoid.

SAA wants to use some of the money to finance a new fleet of aircraft, but what can we do, really. I guess we just have to keep trusting the people that make these decisions.

[Source: Iol]