The North Gauteng High Court (the Court) recently granted an interim interdict preventing a new low-cost airline, FlySafair, from launching. The order was granted following an application by Comair Limited and Skywise Airline (the applicants).
The Air Services Licensing Council (the Council) initially granted Safair Operations (Pty) Ltd (Safair), which operates FlySafair, a license to launch its own domestic low-cost setup carrier on 23 August 2013. In doing so it rejected objections from the applicants.
The applicants sought an urgent interdict in an attempt to restrain FlySafair from launching its service on the basis that the Council should not have granted the license in the first place. The applicants’ protest is based on the argument that Safair is effectively controlled by the Irish group ASL Aviation (ASL), and that three South African directors allegedly holding 75% of Safair’s voting rights are merely fronting for ASL.
The applicants applied for interim relief in the form of a prohibitive interdict restraining Safair from operating a class S1 air service license. The S1 license authorises the holder to operate a commercial scheduled air service within South Africa. The interim relief sought by the applicants is effective pending the Council’s review of the decision to grant the license.
Comair Limited (Comair) was joined in its application for an interim interdict by Skywise Airline (Skywise), a new low-cost carrier represented by the founders of 1time, Glenn Orsmond and Rodney James. They and Johan Borstlap, the chief executive of the original Sun Air, apparently planned to unveil an additional low-cost airline, Skywise, on the same route, Johannesburg to Cape Town, before the end of 2013. They were also in the process of leasing two Boeing aircraft to start their operation; having been granted a license by the Council to do so. Skywise was busy completing its application for an operating certificate - the last regulatory hurdle to be overcome before the start of their operation.
While Safair has been an operator of air services within South Africa for over four decades, its operation has been limited to non-scheduled flights. To operate scheduled flights, Safair had to obtain a specific license rom the Council, established under section 3(1) of the Air Services Licensing Act, No 115 of 1990 (the Act).
In June 2013, Safair applied for an amendment to its current air service license to enable it to accommodate scheduled flights. In terms of section 16(4)(c), before a license for scheduled flights can be granted, an applicant must prove that it is a South African resident, or that at least 75% of the voting rights are held by South African residents (as defined in the Act). The applicants made written representations, as prescribed by section 15(3) of the Act, against the approval of the Safair amendment application on the grounds that the section 16(4)(c) requirements had not been met.
The applicants specifically argued that Safair do not adhere to the requirements that 75% of the voting rights are held by South African residents and that Safair will not be effectively controlled by such residents. They argued that the purpose of the Act is to regulate within South Africa and through the Council the licensing of air operators. The purpose is to encourage the safety of persons travelling in aircraft so operated and to pledge that the air services licensed by the Council are regulated by residents of the Republic.
The applicants also argued that the purpose of the inclusion of the phrase "ordinary resident" is to enhance the capability of the Council to reach, connect and deal with those in effective control of the license and to promote the capacity of the persons themselves who control the license. In respect of voting rights, the applicants contended that Safair implicated a scheme that masked true ownership so as to satisfy compliance with the provisions of section 16(4)(c)(ii) and 16(5), when in truth it fell outside real effective control of its parent company.
The applicants essentially asked the Council to undertake an investigation contemplated in section 20 of the Act, which outlines the procedures to be adhered to. The applicants contended that there could not have been a proper investigation because the Council erroneously concluded that there has been full compliance with the provisions of section 16(4) of the Act.
The applicants’ challenge at a factual level was twofold. It first argued that Safair will not be in 'effective' control of its proposed commercial scheduled air service at all, but that 'effective' control will vest in Safair's holding companies in Ireland and Belgium. Second, it contended that one of Safair’s directors, who holds 25% of the shares, was not an ordinary resident in South Africa as prescribed in section 16(4)(c)(ii) of the Act, but was ordinarily resident in Ireland.
For an application for an urgent interim interdict to succeed, requirements must be satisfied. These include urgency; the existence of a legal right; proof of a well-grounded apprehension of irreparable harm; and the lack of an adequate ordinary remedy. An applicant's prospects of success and the balance of convenience are generally also considered. The North Gauteng High Court was confident in its finding that these requirements were satisfied.
In response to the granting of the interdict sought by the applicants, FlySafair’s CEO, Dave Andrew, said that the order had come as a surprise to them: "Unfortunately and contrary to our expectations, the court has granted the interdict sought by our competitors. This order effectively prohibits us from starting our operation until such time that the Air Services Licensing Council’s decision to grant Safair the scheduled license has been reviewed by the court."
Andrew stressed those passengers’ that expended costs on flights and reservations will be refunded: “We have taken all the necessary precautions to protect our customers in the eventuality that not all goes according to plan. Following negotiations with all the major banks and having provided guarantees to the Air Services Licensing Council, passengers are guaranteed that their money will be refunded in full should they wish to cancel instead of postpone their flights until such time that FlySafair is fully operational.”
In further safeguarding passengers’ rights, the second applicant, Comair, voluntarily undertook to submit itself to an order in ensuring all passengers were to be accommodated for. The Court ordered Comair to accommodate FlySafair’s travelling members of the public who bought tickets by honouring their ticket prices and dates of travel agreed to with FlySafair. Comair is to take all reasonable steps to ensure that all persons who had bought Safair tickets would be accommodated on the dates designated in such Safair tickets, in aircraft made available by Comair.