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Recent developments and trends

Recent developments

Are there any notable recent developments or trends in the aviation sector in your jurisdiction?

The aviation sector has experienced a recent increase in the number of aircraft acquisitions and disposals notified to the South African competition authorities. An asset acquisition or disposal may require notification to the South African competition authorities where:

  • the proposed transaction constitutes a merger;
  • the transaction has an effect in South Africa; and
  • prescribed turnover and asset thresholds are met.

Progress is also being made with regard to fully implementing the Cape Town Convention into domestic law. Draft regulations and various statutory amendments are being prepared. Although South Africa is a contracting state to the Cape Town Convention, it has not been fully implemented.

Regulatory framework

Domestic law

What is the primary domestic legislation governing the aviation industry in your jurisdiction?

South Africa has a number of domestic laws which regulate the aviation industry.

Primary legislation includes:

  • the Civil Aviation Act and Civil Aviation Regulations;
  • the Convention on International Interests in Mobile Equipment Act; and
  • the Convention on the International Recognition of Rights in Aircraft Act (the 1948 Geneva Convention on the International Recognition of Rights in Aircraft was transformed through the enactment of this act).

Other key legislation includes:

  • the Air Service Licensing Act;
  • the Domestic Air Service Regulations;
  • the International Air Service Act and Regulations; and
  • the Mortgaging of Aircraft Regulations.

International law

What international aviation agreements has your jurisdiction concluded?

South Africa has concluded the Cape Town Convention on International Interests in Mobile Equipment, which is given effect in South Africa through the Convention on International Interests in Mobile Equipment Act. Section 2(1) of the act provides that, subject to its provisions, the Cape Town convention and protocol “have the force of law in the Republic”. The act attaches the convention and protocol as scheduled to it. Therefore, the Cape Town Convention forms part of the physical text of the Convention on International Interests in Mobile Equipment Act.

South Africa is also a signatory to the Hague Convention on Trusts 1986.

Regulatory authorities

Which government bodies regulate the aviation industry and what is the extent of their powers?

The South African Civil Aviation Authority (SACAA) is mandated with controlling, promoting, regulating, supporting, developing, enforcing and continuously improving levels of safety and security throughout the civil aviation industry. The SACAA’s main areas of oversight are:

  • aviation security;
  • aviation infrastructure;
  • aviation safety operations; and
  • accident and incident investigations.

Air carrier operations

Operating authorisation

What procedural and documentary requirements must air carriers meet in order to operate in your jurisdiction?

In order to operate, air carriers must hold an air service licence and an air operating certificate listing the relevant aircraft. Carriers must be registered on the South African civil aircraft register established under the Civil Aviation Regulations and maintained by the South African Civil Aviation Authority (SACAA).

Applications for the registration of an aircraft and the issuance of a certificate of registration should be made to the director of civil aviation and the SACAA.

 

  • in the case of an aircraft last registered in a foreign country, either:
    • a certificate or notification of cancellation from the appropriate authority of the state or territory in which the aircraft was last registered; or
    • a certificate or notification of non-registration from the appropriate authority of the state or territory from which the aircraft is imported; evidence of ownership or suitable affidavit stating that the applicant is the owner of the aircraft; the supporting clearance importation document from the South African Revenue Service issued under Section 38, 39 or 44 of the Customs and Excise Act; and payment of the appropriate prescribed fee;
  • if the aircraft is to be registered in the name of an individual, proof of the individual’s identity;
  • if the aircraft is to be registered in the name of a company, close corporation or trust, the corporate and/or founding documentation of that entity; or
  • in the case of an amateur-built or production-built aircraft, a copy of the build number authorisation issued by the director of civil aviation.

The commissioner may exempt an applicant from these requirements if satisfied that such exemption will not jeopardise aviation safety.

Ownership and control

Do any nationality or other requirements or restrictions apply to ownership or control of air carriers operating in your jurisdiction?

Yes – for a carrier to be registered on the civil aircraft register, it must be registered in the name of a South African resident. Pursuant to the Air Services Licencing Act and the International Air Services Act, a licence will be issued only if the applicant:

  • is a natural person and resident of South Africa; or
  • if not a natural person, is incorporated in South Africa and at least 75% of the voting rights in respect of such person are held by residents of South Africa.

Financial requirements

What financial thresholds must air carriers meet to obtain operating authorisation?

Although no financial thresholds are prescribed, applicants must provide sufficient evidence to the Air Service Licensing Council to prove that they are financially capable of operating an air service. An applicant must submit audited financial accounts of the last completed financial year and/or certain financial information to enable the council to make a decision.

Insurance coverage

What is the required level of insurance coverage for air carrier operations?

The insurance requirements are specified in the Air Services Licensing Act, the International Air Services Act and the Civil Aviation Act. Registered aircraft owners or operators must have insurance for damage or loss caused by the aircraft to any person or property on land or water.

International Air Services Regulations Under the International Air Services Regulations (Regulation 5, Insurance), the required level of insurance coverage in respect of passenger liability is R1 million per seat (irrespective of the category of aircraft) for the total number of seats authorised by the certificate of airworthiness applicable to the aircraft.

In respect of third-party liability, the required level of insurance coverage is:

  • R50 million, in relation to an aircraft with a maximum certificated mass exceeding 20,000 kilograms (kg);
  • R20 million, in relation to an aircraft with a maximum certificated mass between 5,700kg and 20,000kg;
  • R10 million, in relation to an aircraft with a maximum certificated mass between 2,700kg and 5,700kg; and
  • R2.5 million, in relation to an aircraft with a maximum certificated mass of 2,700kg or less.

Domestic Air Services Regulations Under the Domestic Air Services Regulations (Regulation 5, Insurance), the required level of insurance coverage in respect of passenger liability is R1 million per seat (irrespective of the category of aircraft, excluding microlight aircraft) for the total number of seats authorised by the certificate of airworthiness applicable to the aircraft. This excludes where the carrier licence does not authorise the transport of passengers for reward.

In respect of cargo liability, the required coverage is R50 per kg of cargo calculated according to the total possible mass of cargo that the aircraft can carry. This also excludes where the carrier licence does not authorise the transport of cargo for reward.

In respect of third-party liability, the required level of coverage is:

  • R50 million, in relation to an aircraft with a maximum certificated mass exceeding 20,000kg;
  • R20 million, in relation to an aircraft with a maximum certificated mass between 5,700kg and 20,000kg;
  • R10 million, in relation to an aircraft with a maximum certificated mass between 2,700kg and 5,700kg;
  • R2.5 million, in relation to an aircraft with a maximum certificated mass of 2,700kg or less (excluding microlight aircraft); and
  • R500,000, in relation to a microlight aircraft.

Safety requirements

What safety requirements apply to air carrier operations, including with regard to professional and technical certifications?

Under the Civil Aviation Regulations, all air carriers must be subject to a safety management system. The system must address:

  • safety policy and objectives;
  • safety risk management strategies;
  • safety assurance agendas; and
  • safety promotion schemes.

Environmental obligations

What environmental obligations apply to air carrier operations?

At present, no legislation has been enacted in relation to environmental obligations applicable to air carrier operations. However, there has been extensive discussion in relation to such obligations, culminating in the White Paper on National Civil Aviation Policy 2017.

Air traffic control

How are air traffic control services regulated in your jurisdiction?

Air traffic control services are governed by the Air Traffic and Navigation Services Company Act, under which the Air Traffic and Navigation Services Company SOC Limited is established. The objectives of the company include “the acquisition, establishment, development, provision, maintenance, management, control or operation of air navigation infrastructures, air traffic services or air navigation services”.

Routes

Do any licensing requirements apply to specific routes?

International routes are operated in accordance with the applicable bilateral air service agreement. Section 91.07.1 of the Civil Aviation Regulations, which pertains to “routes and areas of operation”, states that:

the owner or operator of an aircraft shall ensure that operations are only conducted along such routes or within such areas, for which approval or authorisation has been obtained, where required, from the appropriate authority concerned.

Are any public service obligations in place with respect to remote destinations?

No.

Charter services

Do any special provisions apply to charter services?

A charter application must be submitted for a route; however, no other special provisions apply.

Taxes

What taxes apply to the provision of air carrier services?

The taxes that generally apply to businesses operating in South Africa also apply to air carrier services.

Consumer protection and liability

Airfares

Are airfares regulated in your jurisdiction?

No.

Passenger protection

What rules and liabilities are air carriers subject to in respect of:

(a) Flight delays and cancellations?

Air carriers are subject to no specific provisions in relation to passenger protection. However, they are governed in general terms by the Consumer Protection Act, which applies to all industries – including aviation. The aviation industry is in the process of drafting an Industry Code of Conduct in regard to the Consumer Protection Act, which will govern in detail the rights of passengers in respect of air carriers.

(b) Oversold flights?

See “(a) Flight delays and cancellations?”.

(c) Denied boarding?

See “(a) Flight delays and cancellations?”.

(d) Access for disabled passengers?

See (a) Flight delays and cancellations?”.

(e) Lost, damaged or destroyed luggage?

See (a) Flight delays and cancellations?”.

(f) Retention and protection of passenger data?

The Protection of Personal Information Act, which has yet to come into effect, will cover the retention and protection of passenger data comprehensively.

Cargo

What rules and liabilities apply to the air carriage of cargo?

Part 108 of the Civil Aviation Regulations (Air Cargo Security) governs the air carriage of cargo and states, among other things, that air carriers cannot carry unknown cargo and that cargo must be screened by a regulated agent.

Marketing and advertising

Do any special rules apply to the marketing and advertising of aviation services?

No.

Complaints handling

Do any special rules apply to consumer complaints handling in the aviation industry?

As stated above, air carriers are subject to no specific provisions in relation to passenger protection. However, they are governed in general terms by the Consumer Protection Act, which applies to all industries – including aviation. The aviation industry is in the process of drafting an Industry Code of Conduct in regard to the Consumer Protection Act, which will govern in detail the rights of passengers in respect of air carriers.

Aircraft

Aircraft register

What are the requirements for entry in the domestic aircraft register?

Applications for the registration of an aircraft and the issuance of a certificate of registration should be made to the director of civil aviation and the South African Civil Aviation Authority (SACAA).

Mortgages and encumbrances

Is there a domestic register for aircraft mortgages, encumbrances and other interests? If so, what are the requirements and legal effects of registration?

Pursuant to the Recognition of Rights Act, a mortgage can be registered over an aircraft. The SACAA maintains a separate aircraft mortgage register. An aircraft mortgage takes the form of a prescribed standard form SACAA document called an MAR2.1. Due to its simplistic nature, a deed of mortgage is usually attached as an annexure, setting out further and more detailed terms and conditions of the mortgage. The MAR2.1 creates a statutory sale of the execution right in favour of the mortgagee. The additional deed of mortgage establishes contractual rights and obligations between the mortgagor and the mortgagee.

Detention

What rules and procedures govern the detention of aircraft?

Criminal Procedure Act The Criminal Procedure Act provides for the forfeiture of an article (eg, an aircraft) to the state if it was used in the commission of a crime. However, such forfeiture will not affect the rights of any person – other than the convicted person – in the property, if it is proved that such other person:

  • did not know that the property was being or would be used in connection with the commission of a crime, or could not have prevented such use; and
  • may lawfully possess the article.

Customs duties Where an aircraft has not been duly entered by the importer from a customs duties perspective, the South African Revenue Service (SARS) may seize the aircraft. Further, where the aircraft has not been duly entered within the timeframe permitted by SARS, including the payment of Value Added Tax (VAT) on importation, SARS may instigate the sale of the aircraft and use the proceeds of sale to cover any of its costs and the outstanding VAT on importation. The owner of, and any other person with an interest in, the aircraft is therefore subject to indirect liability for VAT on importation of the aircraft.

Safety and maintenance

What rules and procedures govern aircraft safety and maintenance?

The Civil Aviation Regulations govern aircraft safety and maintenance. The director of civil aviation issues the South African Civil Aviation Technical Standards which also govern, among other things, aircraft safety and maintenance.

Drones

What is the state of regulation on unmanned aerial vehicles (drones) in your jurisdiction?

The Ministry of Transportation and the SACAA added a chapter on remotely piloted aircraft systems (RPAS) to the Civil Aviation Regulations, which came into effect on July 1 2015, and issued a number of other supplementary documents, including technical standards and aeronautical information circulars. Under these laws and standards, South Africa permits different forms of RPAS operation, including private, commercial, corporate and non-profit operations.

Accidents

Investigation

How are air accidents investigated in your jurisdiction?

Chapter 4 of the Civil Aviation Act regulates the investigation of air accidents. The Aviation Safety Investigation Board has been established under the Civil Aviation Act and is primarily responsible for analysing the cause of air accidents and the prevention of such accidents in future.

Liability

What liability regime governs death, injury and loss arising from air accidents?

Section 8(2) of the Civil Aviation Authority Act states the following:

Where material damage or loss is caused by an aircraft in flight, taking off or landing; any person in such aircraft; or any article falling from any such aircraft, to any person or property on land or water, damages may be recovered from the registered owner of the aircraft in respect of such damage or loss, without proof of negligence or intention or other cause of action as though damage or loss had been caused by his or her wilful act, neglect or default.”

Regulatory notification

What are the reporting requirements for air accidents?

Pursuant to the Civil Aviation Act, once the Aviation Safety Investigation Board has completed its investigation of an air accident, it must prepare a report which is made publicly available and which should specify any safety deficiencies identified, as well as possible recommendations for the improvement of safety in future.

Airports

Ownership

What rules govern the ownership of airports (both public and private)?

The Airports Company of South Africa, which owns a number of airports, is publicly owned and governed by the Airports Company Act. No regulations have been promulgated in terms of the act. While an application for an aerodrome licence must provide details of the residence and nationality of directors and shareholders, there is no underpinning in the Civil Aviation Regulations for these details to be for any purpose other than formality and information.

Operation

What is the authorisation procedure for the operation of airports?

The South African Civil Aviation Authority (SACAA) must conduct the requisite audits and inspections of airports. An airport must receive an aerodrome licence to operate and must comply with the Civil Aviation Regulations. Licences are renewed annually, subject to further audits and inspections.

What ongoing operating requirements apply (including obligations relating to safety, security and facilities maintenance)?

Safety management systems must be designed and executed to ensure the safety and security of airports. The provisions of the safety management system must be commensurate with the size, nature and complexity of the operations or activities authorised to be conducted and necessary for the issuance of the requisite licence and certificate. Airport safety must be monitored continuously and renewed procedures to heighten the levels of safety must be implemented. Certain safety requirements are outlined under the Civil Aviation Regulations.

Airport charges

What airport charges apply and how are they regulated?

Airport charges consist of landing, parking and passenger service charges, all of which are regulated by the Airports Company Act.

Air traffic navigation charges are regulated by the Air Traffic and Navigation Services Company Act, which defines an ’air traffic service charge’ as “an amount levied by the company on an operator of an aircraft or an airport in connection with the use of any air navigation infrastructure by, or the provision of an air traffic service to, such operator”. This includes:

  • passenger service charges regulated by the Airports Company of South Africa;
  • safety charges regulated by the SACAA; and
  • air traffic and navigation service charges regulated by the Air Traffic and Navigation Services Company SOC Limited.

Access

What regulations govern access to airports?

No specific provisions in the Civil Aviation Regulations pertain to access to airports. Operators generally enter into contractual agreements to gain access to airports.

Slot allocation

What regime governs the allocation of airport slots (including slot transfer, revocation and disputes)?

Airport slot allocation is governed by the Airport Slot Coordination Regulations applicable to the Civil Aviation Act.

Ground handling

How are ground handling services regulated?

Ground handling services are not regulated.

Competition issues

Governing regime

Do any sector-specific competition regulatory/legal provisions apply to the aviation industry in your jurisdiction?

No sector-specific competition regulatory or legal provisions apply to the aviation industry in South Africa. The conduct of companies in the aviation industry is subject to the Competition Act.

Code sharing and joint ventures

What (if any) competition concerns arise in relation to code sharing and air carrier joint ventures?

Code sharing and air carrier joint ventures may raise competition law concerns by facilitating cartel conduct and raising barriers to entry, resulting in higher prices. The risk of anti-competitive effects depends on the level of coordination and integration in such alliances. In some cases, the South African competition authorities have discovered cartel behaviour arising from such agreements (eg, in relation to an arrangement between South African Airways (Pty) Ltd (SAA) and Lufthansa AG). A number of applications have also been brought to exempt these arrangements from the application of the Competition Act for limited periods. For example, exemptions have been granted to:

  • SAA and Qantas Airways to coordinate commercial passenger airline activities;
  • SAA to become a member of the Star Alliance; and
  • SAA and Etihad Airways in respect of joint pricing and schedule coordination on primary and secondary routes.

State aid

What rules govern state aid in the aviation industry? Do any exemptions apply?

No competition rules govern state aid in the aviation industry. In South Africa, the conduct of state-owned enterprises (SOEs) is subject to the Competition Act. The state is at liberty to support SOEs. For example, the government has provided concessionary financing and guarantees to South Africa’s state-owned airline, SAA, on various occasions.

Notable cases

Have there been any notable recent cases or rulings involving competition in the aviation industry?

Nationwide Airlines Pty Ltd (in liquidation) and Comair Ltd have both been successful in separate follow-on damages cases against SAA. These cases were the first civil damages claims to be brought against a company pursuant to a breach of the Competition Act and are likely to set precedents for similar claims in South Africa in future.

In the Nationwide case, SAA was ordered to pay Nationwide R104.6 million for damages arising from the SAA’s anti-competitive practices. In the Comair case, SAA was ordered to pay Comair R1.15 billion, inclusive of interest (as at the date of the judgment), following the Competition Tribunal’s 2010 findings that the incentive schemes operated by SAA induced travel agents not to deal with SAA’s rivals. The Comair case is subject to further appeal.

Dispute resolution

Disputes

What aviation-related disputes typically arise in your jurisdiction and how are they usually resolved?

Aviation disputes typically involve a respondent that is in possession of an aircraft (as either an owner or a lessee) defaulting on obligations (usually payment obligations) that it owes to the seller of the aircraft (which retains a security interest in the aircraft) or the owner or lessor of the aircraft (ie, the applicant).

As a result of the respondent’s breach of its obligations, the applicant will typically terminate the contractual relationship (eg, the lease or sale) between the parties and proceed to attach the aircraft under the care of the sheriff of the High Court, usually through an ex parte application. This attachment will remain pending confirmation that the applicant’s cancellation of the contract is valid and binding, and will order that:

  • the aircraft is retained as security to satisfy the respondent’s indebtedness in the case of a sale or security relationship; or
  • the aircraft is returned to the applicant where it was being leased to the respondent.

The substantive laws governing such situations are the South African common law of contracts or real security and the Cape Town Convention, to which South Africa is a signatory.