Rival airlines have put South African Airways (SAA) on the defensive on several fronts. Comair, which operates for British Airways in South Africa, and its low-cost unit kulula.com, have complained to the national competition commission that SAA is engaged in anti-competitive conduct that the commission has already found illegal in a separate case.
Last year a tribunal ruled that SAA abused its dominant position by offering commission overrides and other incentives to travel agents, and that this diverted traffic and caused injury to Nationwide Airlines. For reasons SAA has not explained, it did not appeal against that ruling. Comair and kulula.com are now complaining about the same thing, with their trial set for September. Rulings against SAA could open the way for private lawsuits against it where its rivals could seek damages.
Comair, kulula.com, and another low-cost carrier, 1time, are also protesting about plans by SAA to set up its own low-cost domestic carrier before the end of this year. They argue that it is unfair for government-owned and supported SAA to launch new competition against private carriers. Rodney James, marketing and operations director at 1time, says: “Unfortunately, when competition comes from SAA, it won’t be fair because the taxpayers will be paying for it.”
Analysts acknowledge that launching a low-cost unit is likely to require cash at the outset, but point to SAA’s corporatisation by year’s end, predicting that government bailouts after that will decline. They also ask how SAA can reduce its debt and raise revenues when low-cost rivals are taking more of the domestic market, fuel costs are rising, and foreign carriers such as Virgin Atlantic are moving into Africa. ■
Source: Airline Business
