The Free Market Foundation (FMF) think-tank has launched a scathing attack on State-owned regional airline SA Express (SAX), accusing it of being “obscenely subsidised with money diverted from poverty relief and taxpayers”. It also warned that the airline might “be using illegal predatory pricing” to undercut its competitor, private-sector, airlines.

From August 2018 to July 2019, SAX benefitted from government bail-outs and guarantees worth a total of “at least” R1.54-billion, pointed out the think-tank. Over that same period, the airline carried a total of 400 000 passengers. This, the FMF calculated, amounted to a subsidy per passenger of R3 850 on a one-way trip, or R7 700 on a return trip.

“Every person who flies SAX must look down as they fly over conspicuously poor settlements and reconcile their conscience with the implications of their ticket,” asserted FMF executive director Leon Louw. “Every time you are at an airport and see a SAX plane take off, think about the subsidy that you are paying to enable rich people to fly, while taxpayers are fleeced and the poor are denied services, housing and welfare. It is immoral and obnoxious.”

The FMF has calculated that, assuming 50 passengers on each one-way SAX flight, the value of the subsidy for that flight would have paid for two Reconstruction and Development Programme (RDP) houses – fully government-funded houses for the poor.

The think-tank also cited an interview by The Citizen newspaper in December with SAX CEO Siza Mzimela, in which she reportedly said that the airline would compete in the market by offering fares, on certain routes, that were 35% to 55% lower than those of its rivals. “Such predatory pricing is possible only by fleecing taxpayers and the poor,” argued the FMF in its press release.

In July, the FMF accused SAX of breaking the law by not responding to a request for information under the Promotion of Access to Information Act (PAIA). The FMF made a PAIA request to SAX on May 31 regarding the troubled airline’s financial situation. The think-tank should have received a response from the airline by June 19. It did not get one. Consequently, the FMF is now taking legal action against SAX.

Among other things, the FMF had requested access to SAX’s full financial statements for the 2016/17 and 2017/18 financial years (FYs) and the management accounts for the FY ending March 31 this year. It had also requested the going concern assessments by management on March 31 in each of the years 2017, 2018 and 2019. The think-tank had been “particularly concerned” about allegations from 2012 that the airline’s balance sheet and asset register had been overstated – fraudulently.

The FMF observed that the last audited accounts for the airline dated from FY 2016/17. Further, in November last year, the National Treasury had informed Parliament’s Standing Committee on Appropriations that SAX was technically insolvent because its liabilities were greater than its assets. Hence, the bail-out to settle government-guaranteed debt.

The South African Civil Aviation Authority grounded SAX on safety grounds between May and August 2018. The airline has a fleet of 24 airliners. This is composed of ten 74-seat Bombardier Q400 twin-turboprop, ten 50-seat Bombardier CRJ200 jet, and four 70-seat Bombardier CRJ700 jet aircraft.