Summary
- South Africa’s largest carrier, Airlink, is facing allegations of excessive and predatory pricing on a domestic route from 2012 to 2016.
- The Competition Tribunal opened a hearing case following a advice by the Competition Commission to prosecute Airlink for abuse of dominance.
- Airlink is accused of driving out its competitor, Fly Blue Crane, through predatory pricing, and the Commission estimates that lower prices could have saved customers as much as $7.56 million.
South Africa’s largest carrier, Airlink, has appeared before the Competition Tribunal because it faces allegations of excessive and predatory pricing on a domestic route from 2012 to 2016 on a domestic route between Johannesburg and Mthatha within the Eastern Cape.
The Tribunal opened a hearing case following a advice by the Competition Commission to prosecute the airline (formerly referred to as SA Airlink) for abuse of dominance. The Commission investigated three historical complaints lodged by Mthatha business executive Khwezi Tiya, defunct regional carrier Fly Blue Crane, and the OR Tambo District Chamber of Business between 2015 and 2017.
Complaints against Airlink
Mthatha is a city within the Eastern Cape Province of South Africa and the capital of OR Tambo District Municipality (to not be confused with OR Tambo International Airport). Complaints against Airlink were about its flight operations on the route between Johannesburg OR Tambo (JNB) and Mthatha Airport (UTT).
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The complainants claimed that the privately-owned carrier charged excessive prices from September 2012 to August 2016 before it had any competition on the route. Fly Blue Crane, which also operated from JNB, eventually entered the market, offering lower fares and competing with Airlink on the JNB-UTT route.
It’s alleged that Airlink subsequently reduced its fares below its costs, before returning to its excessive prices, following Fly Blue Crane’s exit from the route in January 2017. In accordance with the Commission, lower prices would have saved customers as much as $7.56 million (R108 million) on the time. Besides saving tens of millions, lower prices would have resulted in higher traffic on the route.
Driving out competition
SA Airlink was also accused of predatory pricing to drive out its sole competitor by pricing a few of its flights below its average variable and average avoidable costs. The investigation found that the carrier’s predation contributed to the Fly Blue Crane’s withdrawal from the route.
Photo: LO Kin-hei / Shutterstock
Airlink argued that payment of flown and unflown tickets shouldn’t have been included in SAA’s business rescue process as the cash didn’t belong to SAA. Nonetheless, the courts ruled in favor of SAA, citing that the regional carrier was a concurrent creditor and never entitled to the funds it claimed.
The airline welcomed the choice, as Airlink CEO Rodger Foster said in an announcement,
What do you concentrate on the hearing into Airlink’s conduct? Please tell us within the comments!
Source: News24