The aviation industry could shrink even further if the national carrier's operating licence is suspended by the Air Services Licensing Council for material breaches, which could lead to the escalation of ticket prices as the remaining airlines compete for large passenger demand.
The council has issued SAA with a notice to provide it with three relevant documents within 90 days on the disposal of its majority stake to a private party, Takatso Consortium, failing which SAA's operating licence could be suspended.
This comes after SAA failed to notify the council of the transaction more than a year after it was initiated and announced by the Department of Public Enterprises.
Business Report reached out to SAA for comment, but by the time of going to print it had not materialised.
SAA, Lift and FlySafair remain the only domestic airlines available to a growing aviation market due to the termination of Covid-19 travel restrictions after Comair went burst, while low-cost carrier Mango is close to being liquidated.
In a letter sent to Rosemary Ramakgapola, the aeropolitical affairs manager at SAA on August 3, which Business Report has a copy of, the council said it suspected on reasonable ground, that SAA had failed to comply with the Air Services Licensing Act.
The council was advised that SAA was at the pre-closing stage of the transaction and would commence with concluding the regulatory processes.
However, the council placed on record the material breaches of the provisions of the Act, which included the failure to notify the council of the transaction with Takatso Consortium.
It said furthermore the transaction which it had engaged in, which would result in SAA not being actively in control of the air service, was a direct breach of the Act.
It also needed shareholder approval in terms of the Public Finance Management Act so that the council was afforded an opportunity to ascertain SAA’s compliance and/or non-compliance with the provisions.
“Upon conclusion of the said assessment, council shall in accordance with Section 16(3) of the Act communicate in writing a date for a meeting with yourselves to discuss the findings of the said assessment,” it said.
The second breach was that the guaranteed amount was insufficient.
"Regulation 6A provides that a licensee who operates a Class I air service must submit to the satisfaction of council a guarantee for the total sum of cash receipts of tickets which have already been sold, but which have not yet been rendered by it - which guarantee must be a fair representation of its projected cash flow,“ it said.
The council said that the Consumer Guarantee it had received, dated September 23, 2021, was in council’s reasonable opinion not a fair representation of SAA’s projected cash flow.
The third material breach and offence was the changes of “postholders”, namely the CEO and so on.
The council said SAA had new executive members but it had not followed the due process of notifying the council.
The fourth breach was the management of accounts. It needed a set of audited annual financial statements of the most recently completed financial year certified by SAA’s auditor or the chief executive.
The council asked SAA to ensure the timeous submission of the documents requested
BUSINESS REPORT