FlySafair braces for impact after being pilloried by aviation authorities for its foreign ownership

FlySafair faces an uncertain future as its aviation licence is at risk of being suspended or cancelled, which would effectively ground its flight operations and throw South Africa’s airline industry into turbulence.

This is because two aviation authorities in South Africa have concurred that FlySafair is predominantly owned by foreigners, which is in breach of South African laws and aviation licensing conditions.

The aviation authorities in question are the Air Services Licensing Council and the International Air Services Licensing Council, whose rulings are in response to complaints lodged by Airlink and Global Airways (which co-owns the domestic airline Lift) about FlySafair’s ownership structure.

FlySafair is waiting for the Air Services Licensing Council to announce its sanctions against the airline for not complying with local laws and aviation licensing conditions. The International Air Services Licensing Council hasn’t been able to impose sanctions against FlySafair because the airline successfully secured a court interdict barring the authority from issuing sanctions.

Kirby Gordon, FlySafair’s chief marketing officer, said the airline wanted the International Air Services Licensing Council to first engage with FlySafair and provide reasons before proceeding with punitive actions.

Suspending or cancelling FlySafair’s licence until its shareholding structure is altered to comply with SA laws and aviation licensing conditions is the worst-case scenario. This is because FlySafair is a large airline on which the domestic aviation market depends.

The airline has captured 60% of the domestic aviation market and has mopped up flight capacity left open by the collapse of at least 11 domestic airlines since it began operations in October 2014. FlySafair also operates flights outside of South Africa, including Zimbabwe, Zanzibar and Mauritius, which comprise less than 4% of its total flight capacity.

Gordon is worried about the decisions by the aviation authorities, saying they could have “catastrophic” consequences for SA’s airline industry.

However, FlySafair could face less harsh sanctions than having its aviation licence suspended.

The aviation authorities could slap the airline with fines or penalties, or give the airline more grace (no sanctions) and time to alter its shareholding structure by possibly selling shares in the company to locals.

FlySafair in breach of aviation regulations 

An investigation by the International Air Services Council found that an Ireland-based company, ASL Aviation Holdings, effectively owns 74.86% of FlySafair through an investment holding company. To arrive at its findings, the council relied on the evidence submitted by FlySafair’s competitors Airlink and Lift.

In one of their submissions, the competitors pointed the council to the disclosure by ASL Aviation Holdings in its 2020 financial statements, where it confirmed that Safair Operations (the parent company of FlySafair) is its subsidiary, owning 74.86% of the company.

Furthermore, in its 2022 financial statements, ASL Aviation Holdings confirmed that subsidiaries (in this case, FlySafair) were controlled by it.  According to the council, this is in contravention of SA laws, mainly sections of the Air Services Licensing Act.

The Act requires that holders of aviation licences in South Africa have a minimum of 75% local shareholding. In other words, airlines that fly locally are required to be owned by individuals who are “residents” of the country.  Most aviation players have interpreted and accepted that the 75% requirement also extends to voting rights over how airlines are managed.

The government passed the Act to ensure that South Africa-based shareholders and investors become custodians of airlines and interests in the local aviation industry. The International Air Services Act also requires airlines based in SA and flying overseas to have a “substantial” local shareholding. The airline industry has interpreted this to be a minimum of 51%.

Gordon said the airline recently met with the Air Services Licensing Council, which effectively concurred with the findings of the International Air Services Council. The Air Services Licensing Council has maintained that at least 75% of the voting rights in a domestic airline in South Africa must be held by natural persons, rather than trusts and companies.

FlySafair, Airlink, Lift and government responses 

In disagreeing with the licensing authorities and their interpretation of laws and regulations, FlySafair has offered a technical argument.

Gordon said it was “well understood that at least 75% of the voting rights” in a domestic airline in South Africa must be held by “residents of the republic… While the law clearly references voting rights rather than ownership, this distinction has regrettably been misrepresented to the public in most media reports.”

He said the Air Services Licensing Council confirmed that FlySafair “does not meet these nationality provisions”, adding that the South African Citizenship Act of 1995 required that only “natural persons” can hold such rights, as opposed to trusts or companies.

If the Air Services Licensing Council’s interpretation of the Act is correct and upheld by a court, Gordon said the interpretation would render the majority of South Africa’s airlines non-compliant.

“For example, South Africa’s largest airline, Airlink, is also substantially owned by trusts and companies in the same manner as FlySafair, while South African Airways is wholly owned by the state,” he said.

Airlink, a domestic and regional airline, has responded to FlySafair’s accusation.

Airlink said it was compliant with all South African civil aviation regulations and “respected the regulatory processes and decisions of the domestic and international licensing councils, which are the mandated economic regulators for South Africa’s commercial aviation industry”.

FlySafair believes the aviation licensing laws are ambiguous (the interpretation of ownership vs voting rights regarding the Air Services Licensing Act). In late 2024, the airline applied for a declaratory order, seeking a judicial interpretation to guide future decisions by the Air Services Licensing Council. Gordon said the application had faced opposition from Airlink, Lift and aviation councils, which “have to make decisions that will affect the entire South African flying public”.

A Lift spokesperson said all airlines in South Africa were required to adhere to South African legislation that governs the aviation industry. “The current matter is with the Air Services Licensing Council and with respect to their process, we cannot comment further at this time.”

The minister of transport, Barbara Creecy, can intervene in this matter because the Air Services Licensing Council is part of her department. The department’s spokesperson, Collen Msibi, confirmed to Daily Maverick that FlySafair had appealed to Creecy to intervene in the matter while the council deliberates the sanction against the airline for not complying with local laws and regulations.

“We can confirm receipt of the appeal letter from FlySafair, which was received yesterday [14 January]. The request is currently being considered by the departmental legal services, taking into account the regulatory environment,” said Msibi. DM