2013 saw the emergence of low-cost airline FlySafair. In June 2013 Safair applied for a licence to allow it to operate a commercial scheduled air service. The licence was granted by the Air Service Licensing Council.
An interdict was sought restraining Safair from operating the commercial service on grounds that more than 25% of the voting rights in the carrier were held by foreign persons. The court granted the interdict. The court relied on the requirement that applicants for an air service licence must be actively and effectively in control of the air service. This requirement appears in the Air Service Licensing Act, 1990 and the purpose is to ensure that all air services will be operated in a safe and reliable manner.
What is “effective control”
The court made reference to article 2(9) of the European Regulation 1008/2008 which defines the concept of “effective control” strictly within the context of undertakings and organisations. This interpretation therefore refers to rights derived from contracts, or other sources which allow persons to have a decisive influence over these organisations, such as voting rights.
However, this interpretation does not seem to take into consideration the context within which “effective control” is used in the Act. “Effective control” in section 16(4) (d) of the Act relates to the actual operation of the aircraft and management of the air service to ensure that it is safe and that the carrier remains accountable to the Air Service Licensing Council. In other words, the aircraft should not be operated by an entity other than the holder of the air service licence.
“Effective control” does not refer to voting rights. There is a separate requirement in section 16(4)(c) which requires at least 75 per cent of the voting rights in respect of the carrier to be held by residents of South Africa.
The ordinary rules of statutory interpretation say that no language is superfluous and therefore the two requirements – relating to “effective control” and minimum voting rights held by South African persons – must be distinct from one another.
The operation of a safe and reliable air service should not be conflated with the control and decision-making structures within a company.
If, as the court held, FlySafair does not have at least 75% of its voting rights held by South African residents then it would be correct that it does not meet the requirement in 16(4)(c). However, it does not automatically follow that FlySafair is not in effective control of the air service. FlySafair may be in effective control of the air service even if more than 25% of its voting rights are held by foreign persons. The operation of a safe and reliable air service should not be conflated with the control and decision-making structures within a company.
FlySafair has changed its corporate structure, concluded a black economic empowerment deal and successfully reapplied for a commercial scheduled air service licence which was granted by the Air Service Licensing Council in April 2014. It now faces a new round of objections before the Licensing Council.
For more detail, have a look at my article, The time for aviation in Africa to take off.