Deregulation in South Africa has suffered a further blow following the demise of independent Phoenix Airways. The subsequent loss of public faith in private operators has led to a call for sweeping changes to the Aviation Act to ensure the financial health of startups.

Phoenix Airways sought provisional liquidation in early October after its new owners discovered the carrier had more creditors than had been disclosed when the sale was completed. The carrier's collapse follows the bankruptcy of global startup Avia Airlines in August, and puts a question mark over the judgement of the licensing authorities.

Roger Mackie, president of the Association of South African Travel Agents, says the blame must be shouldered by the Directorate of Civil Aviation. And Japie Smit, commissioner for civil aviation, agrees that stricter legislation is required. 'Clearly we need to beef up some aspects of the law to provide a safety net for passengers. To this end the DCA is working in conjunction with the travel industry to formulate new legislation regarding startup, and possibly existing airlines,' he says.

He is currently considering proposals for startups to provide financial statements twice yearly and give bank guarantees equalling the sum of prepaid tickets. The licensing council would also have to approve transfers of controlling ownership, and licences would not automatically be transferred.

Phoenix refused to abide by legislation requiring financial guarantees from startups because it was an established airline, formerly Letaba Airways, and took the DCA to court over its demands, in a case that is pending.

Source: Airline Business