SAA responds to warning from air services licensing regulator

South African Airways (SA, Johannesburg OR Tambo) confirmed that it has been warned by the country’s air services regulator of possible legal transgressions, but stressed that these are administrative and have no impact on its current operations or future.

In an Aug. 12 statement, the SAA confirmed it had received a letter from the country’s Air Services Licensing Council (ASLC) citing “some possible violations” of the Air Services Licensing Act. The board required certain information from SAA to ensure compliance with the law.

“SAA is currently reviewing the contents of the letter and will respond fully to the ASLC within or before the timeframe set by the board,” the airline said.

“SAA assures its customers and the public that the issues raised in the letter are administrative in nature, relating to the SEP (strategic partner) transaction which is currently being negotiated by the government, as a shareholder, as well as issues relating to SAA’s interaction with the ASLC, submission of financial statements and internal movement of staff.

“The issues raised in the letter do not impact SAA’s current and future operations as well as the quality of services provided by SAA. To this end, local and regional services continue uninterrupted,” said SAA.

According to the Aug. 3 letter leaked to Fin24, the ASLC gave SAA 90 days to remedy four alleged violations of the law or risk losing its air service licenses.

The first alleged breach was SAA’s failure to formally notify the ASLC of its strategic partnership plans with the private sector consortium Takatso. Negotiations between the shareholder representative Department of Public Enterprises (DPE) and Takatso have dragged on for more than a year. According to the letter, SAA told the ASLC that the transaction was in the “pre-closing stage” and regulatory processes would be concluded after that.

The Takatso consortium is made up of the black empowerment asset management company Harith General Partners (30% owned by the South African Public Investment Corporation (PIC), which manages civil servants’ pensions) and the specialist ACMI Global Aviation Operations (GE, Johannesburg OR Tambo). As part of the deal, Pretoria has provided ZAR 14.6 billion rand (USD 901.3 million) to absorb SAA’s historic debt, while Takatso will inject ZAR 3 billion (USD 185 million) in working capital.

According to the ASLC’s letter, a second possible violation was that SAA had failed to submit an up-to-date guarantee for the full value of tickets sold but not stolen.

Third, as required by law, SAA failed to obtain board approval for personnel changes, including the current CEO and heads of flight and aircraft operations, and flight safety.

Finally, SAA must submit certified financial statements to the ASLC for the year to date, in accordance with the council’s legal obligation to ensure that SAA operates “a safe and reliable air service”.