Over 1 700 jobs at risk at Airlink due to SAA withholding revenue, court hears | Fin24
 
Loading...

Over 1 700 jobs at risk at Airlink due to SAA withholding revenue, court hears

Feb 12 2020 20:09
Phumi Ramalepe


SA Airlink plummeted to a loss of R365 million in November 2019 – compared to a profit of R84 million in September and R50 million in October – as a result of South African Airways withholding revenue from ticket sales, the Johannesburg High Court heard on Tuesday.

The private airline has taken the flag carrier to court over revenue it says SAA owes it for ticket sales generated towards the end of 2019. Initial court papers reportedly indicated that SA Airlink was suing SAA for R700 million, which it wanted the court to order to be paid up within five days. 

SAA was placed under business rescue in early December 2019. The airline's business rescue practitioners, Les Matuson and Siviwe Dongwana, have previously argued that the monies in dispute are pre-commencement debt, which means they would be classified with other debts SAA incurred shortly before going into business rescue. 

But according to Airlink's lawyer, Adv Rafik Bhana SC, the funds owed to Airlink were revenue from tickets sold in November and December 2019 through SAA's booking system. SAA earns a commission from such ticket sales.

The court heard that SAA did not pay the revenue to Airlink because the funds were deposited in SAA's bank account and got mixed up with its other funds, making it difficult to meet Airlink's demands easily. 

'Unthinkable'

"It would be unthinkable if SAA took those funds and used them to fund its own operations and then said to Airlink: 'We owe you the money and will pay it in 30 days or 90 days'. It is unthinkable because it is clearly in breach of the agreements... and that is what business rescue practitioners opportunistically want to do here," Bhana argued.  

SA Airlink now faces the risk of running out of working capital by the end of this month, the court heard, leaving over 1 700 jobs at risk.

Airlink operates on 55 routes to 39 destinations in nine African countries.

Its CEO, Rodger Foster, previously said the airline was able to cover costs short-term, but could not write off several months of turnover without suffering a major impact.

"The airline business is characterised by the sale of high volumes of perishables at low margins. At the same time, there are significant capital and operational costs associated with running an airline, which necessitate continual downward pressure on costs and having enough cash available to cover them," Foster said.

Judgment was reserved. 

saa  |  sa airlink
NEXT ON FIN24X

 
 
 
 

Company Snapshot

Voting Booth

Do you support a reduction in the public sector wage bill?

Previous results · Suggest a vote

Loading...