Flight prices in South Africa are likely to skyrocket if FlySafair’s operations continue to be disrupted, from ongoing salary disputes to regulations over its ownership structure.
FlySafair is the country’s largest air carrier, accounting for roughly 60% of all domestic and regional flights.
The company is currently challenging a decision that states FlySafair’s ownership structure is non-compliant with South African regulations, according to News24.
This is because the International Air Services Licencing Act limits foreign ownership of South African airlines to 25%.
However, Ireland-based ASL Aviation owns nearly 75% of FlySafair’s shares through its subsidiaries or directly.
This prompted FlySafair’s competitors, including Airlink and Lift, to file submissions in late 2020, prompting the International Air Services Licensing Council (IASLC) to threaten the airline with sanctions.
In late 2024, the IASLC stated that FlySafair could see its operating licence suspended or cancelled for its contravention of local ownership laws.
FlySafair promptly responded by filing an interdict against the ruling, buying it a 12-month window to resolve the dispute, which ends in December.
The company is allegedly challenging the AISLC’s decision based on the difference in the interpretation of “ownership” and “control.”
Daily Maverick previously reported that Safair Operations, the company under which FlySafair trades, is divided into three parts.
Only 25% of the company is owned by Safair Holdings.
Another 25.14% is owned by B4i Safair and 49.86% belongs to a South African registered trust.
Airlink and Lift claim that the B4i Safair stake is the only one applicable to local ownership.
Section 16.4 (c) of the Act states that if an airline is not owned solely by a natural person residing in South Africa, it must be incorporated locally and South African residents must hold 75% of its voting rights.
Based on this, Safair reasoned that the trust is compliant because South African residents control it.
However, legal experts questioned this argument, saying that the law distinguishes between juristic persons, such as a trust, and natural persons.
This means that, even if the trustees are proven to be South African residents, FlySafair would still not meet the 75% threshold for natural person ownership.
Not just FlySafair
Aviation expert Guy Leitch warned that there would be severe consequences for South Africa’s airline industry if the IASLC clamps down on FlySafair, based on its interpretation of the Licence Act.
He said that only Cemair and Lift would be considered compliant, as both Airlink and South African Airways (SAA) would also fail to meet the natural person threshold.
Airlink is 25% owned by Qatar and 33% owned by a BEE shareholder, while SAA is a state entity managed by the government.
None of these would qualify as “natural persons” under the IASLC’s interpretation of South Africa’s ownership regulations, meaning they would also be grounded.
All of this is expected to have dire consequences for flight availability, leading to massive price hikes.
FlySafair accounts for 60% of local air traffic, equating to approximately 30,000 passengers per day.
South Africa’s flight prices have already surged in recent years due to the loss of seat capacity, which stems from the loss of other airlines like Kulula and Mango.
Kulula operator Comair shut down in 2022 following a difficult financial period brought on by the Covid-19 pandemic.
The South African Civil Aviation Authority also made the controversial decision to ground the airline over unproven safety concerns, preventing the business from making a recovery.
The loss of Kulula wiped out 40% of the country’s domestic seat capacity, leading to an enormous jump in flight prices.
There are now concerns that history could repeat itself with FlySafair’s looming shutdown, but the company’s Chief Marketing Officer, Kirby Gordon, remains adamant that no ownership laws have been contravened.
Gordon said the airline has not received any additional foreign ownership since a restructuring that took place between 2013 and 2014.
Pilot strike
While all of this is going on, the airline is also facing strike action from its own pilots over salary and schedule disputes.
This has naturally raised the question of whether FlySafair will raise its flight prices to compensate for any salary increases it agrees to.
However, aviation expert Phuthego Mojapele, says he doesn’t believe the airline will raise flight prices to meet the pilots’ demands for higher salaries, reported ENCA.
He argued that it would undermine FlySafair’s business model and reputation as a low-cost air carrier, which is what helped it to achieve its position as the nation’s largest airline.
“For FlySafair to survive in the market, it must keep its prices as low as possible. You cannot charge [competitor’s price] if you are FlySafair because then consumers will have no reason to come to you as they could choose the [competitor],” he said.
“Given the benefits they have, including free bags, free meals and priority boarding [some of which are not available within FlySafair.”
The airline’s most recent offer was rejected over the weekend, causing the strike to enter its second week.
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