South Africa's three independent airlines, BA-Comair, Sun Air and Nationwide, have lodged an urgent complaint to the Competition Board claiming South African Airways is charging fares that are "below cost and therefore constitute predatory behaviour on the part of the dominant carrier".
The board's chief director support staff, Wouter Meyer, says that, unless SAA admits culpability and agrees to terminate its behaviour, or the board finds that SAA's explanation of the allegations is reasonable, a formal investigation will be conducted that could take several months.
In their submission to the board, the airlines draw attention to SAA's large capacity increases on a number of domestic routes, combined with pricing policies which they say are not viable. BA-Comair's commercial director, Bert van der Linden, says some SAA fares are cheaper than the buses between Johannesburg and Durban.
"SAA has also increased its capacity by about 50% on the Durban route, effectively dumping seats onto the market at fare levels that, in terms of the numbers of seats offered, cannot achieve full cost recovery," he adds.
He says that SAA already has a 75% domestic market share and appears to want more at any cost. "It would seem SAA wants to bring us to our knees - to wipe out the opposition," says Van der Linden. He adds that fares in South Africa are already 60% below the equivalent European norm and costs are higher because of the parlous state of the rand against the dollar.
Van der Linden says BA-Comair will compete with SAA's fares up to a point, but adds "we cannot sit around and wait for them to erode our market". If SAA controlled the domestic market, fares would go through the roof, he says.
Sun Air MD Johan Borstlap says the independents would be in no position to complain if SAA was profitable. "If SAA was competing on a level playing field and showing a profit we would have to shut up and re-evaluate our operations, but that is not the case." He adds that "SAA is throwing taxpayers' money into the pot, whereas independents have to live off their own resources". SAA reported a loss of R207 million ($37 million) for the first six months of this year. By financial year end it will have lost almost R1 billion over the last three years.
SAA is also facing an "intention of interdict" by BA-Comair to stop it from poaching crew. The three independents claim to have lost more than 60 cabin attendants to SAA which offers, not only higher salaries and the opportunities of overseas flight, but also financial compensation to crews who resign without giving notice or paying off training bonds.
Senior SAA spokesman, Leon Els, says the airline is unaware of the Competition Board complaint and reserves comment. He says SAA will contest the intention of interdict by BA-Comair.
Source: Airline Business
