The South African High Court has dismissed with costs another attempt by Airlink (South Africa) (4Z, Johannesburg O.R. Tambo) to recover about ZAR890 million rand (USD50.5 million) from its former franchise partner South African Airways (SA, Johannesburg O.R. Tambo).
In 2022, the regional airline lodged a third application in the Gauteng High Court in Johannesburg to retrieve revenue from Airlink tickets sold by SAA before it went into voluntary business rescue on December 5, 2019, but which, according to Airlink, were payable after that date.
Airlink terminated its long-standing franchise agreement with SAA after the national carrier went into business rescue and failed to pay out the ticket revenue. It first sued SAA over the issue in early 2020 and took the matter on appeal later that year, but the claim was dismissed because SAA was still in business rescue and the business plan had not yet become effective. Neither court pronounced on the validity or extend of the business rescue plan. However, in its ruling on July 25, the High Court upheld the two previous judgements on the same matter by the Supreme Court of Appeal and the High Court in 2020.
Airlink argued that payment owed for flown and un-flown tickets before SAA went into business rescue in 2019 should not have been part of the business rescue process as it was not SAA's money to keep and consume, but belonged to Airlink. It relates to tickets sold by SAA for flights operated by Airlink under the then-franchise agreement. Therefore, Airlink argued its funds should not have been treated as "pre-commencement debts" under the business rescue process, as this classified Airlink as a concurrent creditor under the business rescue plan.
Under SAA's business rescue plan adopted on July 14, 2020, concurrent creditors (meaning all unsecured pre-commencement creditors), were allocated a total of ZAR600 million (USD34 million) translating into about ZAR0.07 in the rand (USD0.00) for a dividend distribution paid over three years.
SAA's business rescue plan established a payment "waterfall" or ranking of different creditors who were entitled to payment, or who were precluded from pursuing their claims once the airline was discharged from administration on April 30, 2021. The dispute between Airlink and SAA was whether the regional airline continued to have a claim against the national carrier after it exited business rescue. Due to the nature of its claim, Airlink argued it should have been treated as a higher-ranked creditor, coming before any concurrent creditors.
However, in the latest judgement, the court upheld the previous rulings in the case, saying that no new development in law had been presented. It found that Airlink was, as per the business rescue plan, a concurrent creditor and not entitled to a preferred claim against SAA after the business rescue process concluded.
"Airlink respects the court's decision; it is, after all, the duty of the company's leadership to explore every available avenue to recover the funds. Meanwhile, we will continue to focus on growing Airlink as an independent, financially robust, commercially vibrant, competitive and sustainable airline," commented Airlink Chief Executive Officer and Managing Director Rodger Foster.
SAA Interim Chief Executive Officer John Lamola welcomed the court ruling and expressed the hope it would lay the matter to rest. "Today's judgement is another step in helping us conclusively turn the page on that chapter as we move toward becoming a more sustainable, resilient business, with new routes on the horizon."
