More trouble for ailing SA Express

A law firm, a shuttle service and competitor SA Airlink are the latest entities to file papers against the beleaguered carrier, which is heavily reliant on bailouts

A law firm has joined the list of entities that want ailing domestic and regional state carrier SA Express to be liquidated for unpaid services.

As if this were not enough, the airline’s competitor, SA Airlink, has also approached the court to reverse a decision granting the state-owned carrier a licence to fly to three regional countries.

The licence to fly to Botswana, Zimbabwe and Angola is key to the turnaround strategy of SA Express.

The carrier’s financial problems have worsened in the recent past, resulting in it being grounded for unpaid landing fees and often turning to government for bailouts and guarantees.

City Press has learnt that shortly after being served with papers by law firm Matlala Von Metzinger for unpaid services – said to be running into millions – SA Express called the company for a meeting to discuss the matter.

In response to questions from City Press, SA Express confirmed that it had requested a meeting with the law firm to verify the work that it had done for the airline in 2016/17.

“To this end, a meeting has been requested, and agreed to by Mr Matlala, who will bring supporting documentation to enable management to undertake the review,” said the carrier.

“SA Express has previously indicated that it is dealing with a number of irregular transactions and contracts, and to this end, it is critical for the new management to exercise caution and diligence prior to authorising payments.”

But this was not the only matter the airline had to deal with.

On Friday, SA Express was expected to file court papers to oppose a liquidation application by Mothebe Shuttle Services for unpaid services.

It is not clear whether the airline filed the papers, but Ian Small-Smith, the lawyer representing the shuttle company, said the airline had missed previous deadlines to file papers on the matter.

“They undertook to file today [Friday]. If they do not file today, we will put the matter on the unopposed roll on Monday. Can you believe that SA Express runs the risk of being liquidated unopposed on Monday because it does not adhere to the rules of court?” he said.

SA Express spokesperson Mpho Majatladi could not confirm on Friday whether the airline had met the deadline to file the court papers to oppose the application by Mothebe. She referred City Press to a statement issued on September 12 on the matter.

In it, Majatladi had said: “Mothebe Shuttle Services is among the contracts that were identified by a recent forensic investigation as irregular.

“The investigation also implicated SA Express procurement staff, who were later charged with gross misconduct. The airline has since opened criminal cases against the accused.

“The contract has also been reported as one of the irregular contracts to the Zondo commission of inquiry. Should Mothebe Shuttle Services proceed with the matter against SA Express, the airline intends to respond appropriately within the legal framework.”

SA Airlink will also take legal action on Monday, after its attempt to reverse a decision to grant SA Express permission to fly to Botswana, Zimbabwe and Angola by the International Air Service Council (IASC) failed.

The licence to fly the lucrative routes was awarded in September and was hailed as crucial “as it would allow the airline to continue to make steady progress in its quests to achieve long-term commercial sustainability”.

In correspondence with SA Airlink, the council indicated that it stood by its decision and would oppose the matter.

READ: South Africans may fork out hundreds of millions more in bailouts as SA Airlink takes on SA Express

In the urgent court papers, SA Airlink CEO Rodger Foster said he wanted the court to prevent SA Express from flying the new routes, pending the review of the decision.

“First, the decision will result in a further substantial drain on the public resources invested in SA Express,” Foster said. “To start a new route is a considerable financial undertaking that involves massive sunk costs, substantial working capital and technical capacity ... Therefore, SA Express will be required to incur significant capital and working capital expenditure.

“It is quite apparent that SA Express does not currently have the capital to do so. If it did, there would be no concern about its status as a going concern, but in his letter, dated September 27 2019 [about the consolidation of SAA, Mango and SA Express], Transport Minister Fikile Mbalula makes it clear that this is a very real concern.

“Thus, for SA Express to embark on the new routes will necessitate a further substantial injection of capital, which will result in massive expenditure of more funds. That additional depletion to the fiscus would be over and above the substantial amounts of public funds already advanced to SA Express by way of bailouts, guarantees and the like.”

Foster further argued that the maintenance status of the “ageing fleet, together with its financial difficulties, may pose a risk to the safety of the service”.

He also said that, given the severe challenges the state airline faced, it resulted in passengers being stranded and rebooked on to SA Airlink flights via the booking system it shared with SA Express in terms of an interline agreement in force between SAA, SA Express and SA Airlink.

Majatladi said SA Express would oppose the application, which it viewed as being “intended to stifle and limit competition”.

“These routes are an important part of the turnaround strategy as regional routes generate higher yields than domestic markets,” she said.

Abram Mashego Senior journalist | City Press

+27 11 713 9001 abram.mashego@citypress.co.za Media Park, 69 Kingsway Road, Auckland Park

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