Airlink (South Africa) (4Z, Johannesburg O.R. Tambo) is looking to sue South African Airways (SAA) and its business rescue practitioners (BRPs) for ZAR700 million rand (USD47 million) in unpaid ticket revenue, business news site Moneyweb has reported citing court documents. The regional carrier asserts that the lost income is putting its operations at risk.

The ZAR700 million (USD47 million) owed to Airlink is broken down as follows:

  • ZAR430 million (USD 29 million) for flown tickets and related revenue collected in November 2019;
  • ZAR83 million (USD5.6 million) for flown tickets and related revenue for the first five days of December 2019 before going into business rescue;
  • ZAR201 million (USD13 million) in unflown revenue for tickets sold but not utilised between July 2018 and November 2019.

Airlink has been able to agree with the BRPs - Les Matuson and Siviwe Dongwana - about the revenue earned from December 6, 2019, onwards and it is currently being paid daily.

SAA has been in business rescue since December last year, which protects it from litigation and enforcement of claims. Its BRPs have not responded to a formal request from SA Airlink to proceed to court explained Airlink Chief Executive Officer (CEO) Rodger Foster in court papers submitted to the Gauteng High Court in Johannesburg. The airline's boss has requested access to the court and for swift intervention as the reduction in revenue is affecting his airline's business.

“Without this cash being paid, Airlink may not be able to continue operations in the very near future,” he states. “The airline business is a low margin one. Airlink relies on high turnover and consistent cash flows to fund its business on a month-to-month basis.”

Airlink incurred ZAR389 million (USD26 million) in operating expenses in November, and as a result of SAA’s refusal to transfer due ticket revenue, it had to use working capital reserves to fund these expenses and it also breached one of its aircraft finance agreements, informed Foster.

The two airlines have been in a long-standing alliance with SAA selling Airlink tickets on the global distribution system (GDS) used by SAA, said Foster. It has paid for a licence to use the GDS and SAA earns a commission on all ticket sales. The revenue and related charges belong to Airlink and cannot be deemed as debts, argues the CEO.

The BRPs disagree, as they consider the sums to be pre-commencement debt, meaning that they are classified with other amounts SAA incurred shortly before going into business rescue. These are typically put on hold while SAA is in business rescue and creditors are not allowed to enforce claims on them.

According to the ch-aviation fleets advanced module, Airlink operates eight Jetstream 41s, seventeen E135s, eleven E140s, three E170s, and twelve E190s on a network that spans South Africa as well as Zimbabwe, Zambia, Botswana, Namibia, St. Helena, Mozambique, Uganda, Madagascar, Lesotho, and Eswatini (formerly Swaziland).

Last month, Airlink began the process of divorcing itself from SAA following the replacement of its SAA franchise agreement with a new commercial arrangement. To that end, effective June 11, 2020, it will resume operating flights under its own "4Z" carrier code.

On January 28, SAA confirmed it had secured a ZAR3.5 billion rand (USD235 million) government bailout from the state-owned Development Bank of Southern Africa. Shortly after the announcement, another state-owned partner carrier, South African Express (EXY, Johannesburg O.R. Tambo), also demanded SAA make good on its dues as per the terms of their commercial agreement.

"The revenue uplifted by SAA is property belonging to SA Express and does not form part of property belonging to SAA," it said in a statement. "As of December 7, 2019, SAA has been in unlawful possession of the collected revenue and has no right to retain the revenue collected. The said revenues are entitled to SA Express as SAA purely acts as an Agent for SA Express. The SA Express Board and Executive Management have been working with the SAA Business Rescue Practitioner (BRP) to resolve this matter over the last two months with no imminent way forward. The Board also took a resolution to engage with the Shareholder [i.e. government] to resolve this pressing matter."

SA Express is also facing legal action from several creditors among which is Ziegler SA. The logistics specialist is owed ZAR11.3 million (USD770,000) has filed a suit in the Gauteng High Court seeking to have SA Express declared bankrupt and either be placed into business rescue or liquidated.