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South African Airways is not compelled to transfer money it is holding on behalf of privately-owned regional airline Airlink, the Gauteng High Court ruled on Monday.
Airlink brought the application in order to recover funds from the sale of Airlink flight tickets. In terms of its long-standing franchise agreement with SAA, sales of tickets for travel on Airlink SA8-coded flights were processed by SAA's computer reservation system.
Revenue from these sales was meant to be ring-fenced and safeguarded until they were paid over to Airlink once the tickets had been flown.
Fin24 reported earlier in February this year that Airlink reflected a loss of R365 million in November 2019 – compared to a profit of R84 million in September and R50 million in October. The airline told the court this was as a result of SAA withholding the revenue from ticket sales.
Airlink wanted the court to order SAA to pay up about R700 million.
According to Airlink, the franchise arrangement served both carriers well for many years until last November when SAA said it was unable to transfer funds to Airlink that were derived from tickets redeemed on Airlink flights in the preceding weeks, as it used the money for its own working capital.
"Although we are disappointed by the judgment, we respect the judicial process and will either seek leave to appeal or recoup our revenue from SAA as a creditor," Airlink CEO and managing director Rodger Foster said in a statement.
Foster told Fin24 previously that Airlink had already been working with SAA for a number of years to see how it could adjust the franchise agreement "to ensure Airlink's survival given SAA's precarious financial situation". The franchise agreement dates back to 23 years ago.
While he described the judgment as a setback for Airlink, he said the airline had a robust balance sheet and had made alternative arrangements to ensure it had sufficient funds available to continue operating without any disruptions.
"At the same time, as part of our resilience and growth strategy, we have been busy preparing for business beyond and after the SAA franchise [agreement ends]", added Foster.
In January this year Airlink notified SAA of its intention to end the franchise agreement on June 10, 2020. From that date Airlink will operate on its unique 4Z flight designator and ticketing code.
"Airlink has also been putting in place cooperative agreements with several international long-haul airlines to carry connecting passengers and cargo on its comprehensive network across Southern Africa," said Foster.
