BA franchisee fails to stop state support for South African Airways

22/06/15

An application for constitutional declarators and the judicial review of decisions by the Minister of Finance to grant a series of multibillion Rand guarantees to national flag-carrier South African Airways has been dismissed by the High Court in Pretoria.

Just two of the 147 national carriers in the world are currently in profit (Singapore and Ethiopian Airlines). SAA (which was established in 1947)  has received a series of state guarantees over the past decade, culminating late last year in a R5billion 'perpetual guarantee'.

BA, operated in Southern Africa by Comair, launched a multiple attack on the State support. It was common cause that at the time the 'perpetual guarantee' was granted SAA was technically insolvent.  

BA contended that the support was firstly assailable on an array of competition law grounds. The Court (Fabricius J) accepted the argument for the Ministers of Finance and Public Enterprises that it was not open to Comair to blend competition law attacks with judicial review instituted in terms of the Promotion of Administrative Justice Act ( enacted pursuant to s33 of the Constitution). It held that as a matter of jurisdiction these attacks fell to be pursued through the Competition Tribunal and Appeal Court; Comair had chosen not to do so.

BA's second attack was that the Ministers were bound by legitimate expectation. This it founded on the Domestic Air Transport Policy adopted by the South African Government. This too failed. The Court pointed to the separation of powers, and the rejection by the Constitutional Court of attempts to procure court intervention in public finance: "the heartland of executive power". The Court did not accept that policy statements of the kind in issue had binding effect.

The third main challenge was that granting a guarantee in circumstances in which there was little or no prospect of repayment by the state enterprise amounted to a usurpation of the power of Parliament to pass budgets. This too was rejected; it misconceived the nature of a guarantee, authorised under s70 of the Public Finance Management Act.

The judgment is here.