Gunship
7th Nov 2005, 06:20
SOUTH African Airways (SAA) and Comair will face off in front of the Competition Tribunal today following Comair’s complaint that the national carrier is abusing its domestic market dominance.
Comair, which operates British Airways in SA and low-cost carrier kulula.com, lodged a complaint with the Competition Commission in October 2003.
It claimed SAA offered incentive commissions to travel agents to influence them to sell SAA tickets at the expense of rival carriers. In July the tribunal ruled against SAA in a similar case lodged by Nationwide Airlines.
In that ruling, the tribunal said it had found conclusive evidence showing SAA had abused its dominant position by offering incentive schemes to travel agents “to sell more SAA tickets and less of those of its rivals”. Such practices were in breach of the Competition Act.
The body said the schemes were detrimental to the interests of consumers, created barriers to entry for other airlines and impeded SAA’s competitors from expanding.
SAA was fined R45m, which constitutes 2,25% of nearly R2bn of SAA’s sale of domestic tickets through South African travel agents in the 2000-01 financial year.
It has appealed against this, with CEO Khaya Ngqula saying the airline “does not have the money” to pay the fine. The tribunal said, however, that SAA’s financial problems were not a consideration.
“The maximum permissible fine would have been R200m,” the tribunal said.
The ruling has also opened the way for Nationwide and Comair to proceed with a civil claim against SAA in the high court to recover damages.
Nationwide estimates that SAA’s anticompetitive behaviour has cost it more than R200m.
SAA’s request to have the Comair case postponed until its Nationwide appeal has been concluded was rejected by competition authorities.
The national airline’s request that the two cases be consolidated — since they dealt with the same issue — also has been rejected.
Meanwhile, SAA and three other airlines could be slapped with a 10% fine on their 2004 revenue if found guilty by the tribunal.
In March this year the Competition Commission found that the airlines had colluded to “simultaneously introduce a fuel surcharge of equal amounts on the price of tickets on all legs of domestic flights, which resulted in price increases”.
The other airlines involved in the price-fixing collusion are Nationwide Airlines and SAA’s feeder airlines, SA Express and SA Airlink.
The Competition Commission found that they all increased their airfares R40 a ticket in May to offset rising fuel prices.
The commission recommended to the tribunal that the airlines be fined 10% of revenue.
Commission spokeswoman Zodwa Ntuli said Comair had been involved in the price-fixing collusion as well.
However, Comair admitted its conduct was in contravention of competition law and successfully applied for leniency in terms of the commission’s corporate leniency policy.
This meant Comair was not cited as one of the respondents in the referral paper on condition that it gave evidence against the other airlines to assist the commission in proceedings before the tribunal.
From Business Day (http://www.businessday.co.za/articles/topstories.aspx?ID=BD4A109670)
Comair, which operates British Airways in SA and low-cost carrier kulula.com, lodged a complaint with the Competition Commission in October 2003.
It claimed SAA offered incentive commissions to travel agents to influence them to sell SAA tickets at the expense of rival carriers. In July the tribunal ruled against SAA in a similar case lodged by Nationwide Airlines.
In that ruling, the tribunal said it had found conclusive evidence showing SAA had abused its dominant position by offering incentive schemes to travel agents “to sell more SAA tickets and less of those of its rivals”. Such practices were in breach of the Competition Act.
The body said the schemes were detrimental to the interests of consumers, created barriers to entry for other airlines and impeded SAA’s competitors from expanding.
SAA was fined R45m, which constitutes 2,25% of nearly R2bn of SAA’s sale of domestic tickets through South African travel agents in the 2000-01 financial year.
It has appealed against this, with CEO Khaya Ngqula saying the airline “does not have the money” to pay the fine. The tribunal said, however, that SAA’s financial problems were not a consideration.
“The maximum permissible fine would have been R200m,” the tribunal said.
The ruling has also opened the way for Nationwide and Comair to proceed with a civil claim against SAA in the high court to recover damages.
Nationwide estimates that SAA’s anticompetitive behaviour has cost it more than R200m.
SAA’s request to have the Comair case postponed until its Nationwide appeal has been concluded was rejected by competition authorities.
The national airline’s request that the two cases be consolidated — since they dealt with the same issue — also has been rejected.
Meanwhile, SAA and three other airlines could be slapped with a 10% fine on their 2004 revenue if found guilty by the tribunal.
In March this year the Competition Commission found that the airlines had colluded to “simultaneously introduce a fuel surcharge of equal amounts on the price of tickets on all legs of domestic flights, which resulted in price increases”.
The other airlines involved in the price-fixing collusion are Nationwide Airlines and SAA’s feeder airlines, SA Express and SA Airlink.
The Competition Commission found that they all increased their airfares R40 a ticket in May to offset rising fuel prices.
The commission recommended to the tribunal that the airlines be fined 10% of revenue.
Commission spokeswoman Zodwa Ntuli said Comair had been involved in the price-fixing collusion as well.
However, Comair admitted its conduct was in contravention of competition law and successfully applied for leniency in terms of the commission’s corporate leniency policy.
This meant Comair was not cited as one of the respondents in the referral paper on condition that it gave evidence against the other airlines to assist the commission in proceedings before the tribunal.
From Business Day (http://www.businessday.co.za/articles/topstories.aspx?ID=BD4A109670)