South African Express (EXY, Johannesburg O.R. Tambo) has been placed into final liquidation by the South African High Court, with the government blaming the regional airline's demise on deep-rooted corruption, fraud, years of mismanagement and state capture, exacerbated by the impact of the Covid pandemic.

The move was expected after South Africa's International Air Services Council (IASC) in July cancelled the stricken airline's licences and related route rights following the failure of a second sale attempt. The state-owned regional carrier had not flown since it went into provisional liquidation in April 2020, after having been in bankruptcy protection since February 2020.

Evidence of corruption and bad management at South African Express was revealed in the report of South Africa's Judicial Commission of Inquiry into State Capture earlier this year. During the insolvency inquiry, key directors and executives were subpoenaed regarding financial and operational impropriety, with legal inquiries still ongoing, the legal counsel of the airline's liquidator told ch-aviation.

The Department of Public Enterprises (DPE) has urged law enforcement agencies to speed up the investigations into the corruption and fraud and bring those responsible to book. "By 2019, a criminal investigation was underway, and High Court litigation had been instituted. However, by the time the Commission heard evidence emanating from this investigation, in June 2019, the criminal process had not gained any substantial momentum," it said in a statement.

Findings of the Commission revealed:

  • South African Express improperly received a five-year contract from a provincial administration for certain routes;
  • Funds were paid with no services rendered;
  • Evidence that public funds were syphoned out of provincial coffers to various individuals.

The 691 employees of South African Express have been left without compensation. Criticised for having spent billions to rescue South African Airways (SA, Johannesburg O.R. Tambo), the government said it was unable to provide post-commencement finance to rescue South African Express due to "fiscal constraints". The business rescue failed when the government didn’t provide post commencement funding, having already provided the carrier with ZAR1.5 billion (USD85.4 million) in financial support since 2018, including ZAR164 million (USD9.3 million) in the 2020/21 budget.

The airline's final liquidation order was postponed numerous times in the hope of finding new investors. A first rescue bid by Fly SAX, a special purpose vehicle created by former employees, failed in 2020 after the withdrawal of their anchoring investor, Johannesburg investment firm Strategic Investment Group Africa (SIGA) involving black empowerment asset manager Harith General Partners. Harith then launched a failed bid for now defunct Comair (South Africa) (CAW, Johannesburg O.R. Tambo), and eventually emerged as the majority shareholder of the Takatso Consortium, the successful bidder for a 51% share in SAA.

Three unnamed parties (not Fly SAX) then showed interest in a second bidding process for SA Express in March 2022. Still, with all material assets auctioned off, no buyer was found who was prepared to cough up a reserve price of ZAR10 million rands (USD583,000) for the airline. The final nail in the coffin was the loss of the airline's licenses which had been its only - albeit intangible - remaining assets. Under South Africa's Air Services Licensing Act, licenses are only valid for 12 months from the date of issue, and operations can not be interrupted for longer than one year.

SA Express started operations on April 24, 1994, founded as a vehicle for black economic empowerment in the South African aviation sector by pioneering black-owned investment firm Thebe Investment Corporation, established by a trust associated with the now ruling African National Congress (ANC). They partnered with Canadian businessman Bill Deluce, who co-founded Austin Airways, Air Ontario, and Air Alliance (Canada) in Canada and Global Airlift in Kenya. Brother Robert J. Deluce is the president and CEO of regional airline Porter Airlines (P3, Toronto Billy Bishop City Centre).

SA Express later became a public company and functioned as a regional feeder carrier for SAA, first with DHC-8-300 turboprops and last with a fleet of seven CRJ200ERs. It formed part of a tripartite alliance with SAA and its then franchise partner SA Airlink (now Airlink (South Africa)), each feeding the other. The model disintegrated when SAA went into business rescue on December 5, 2019, owing Airlink millions of rands in ticket revenue.