The Competition Tribunal yesterday heard evidence of alleged excessive and predatory pricing by SA Airlink after complaints on its Johannesburg-Mthatha route between 2012 and 2016 were investigated and referred to the Tribunal for prosecution.
The Competition Commission accused SA Airlink of engaging in predatory pricing by pricing below its average variable costs for certain flights, in response to the entry of a new competitor on the route, Fly Blue Crane, while the predatory conduct contributed to the exit of Fly Blue Crane from the market.
SA Airlink denies the commission’s allegations and is opposing the complaint being heard by the Tribunal, the proceedings of which started last week.
Dr Andile Nontso, the secretary of the regional office of the OR Tambo District Chamber of Business, told the Tribunal yesterday that they believe that until Fly Blue Crane became a competitor, SA Airlink had exploited air travellers on the JHB-Mthatha route.
Before SA Airlink faced competition they had charged more than R4 000 and sometimes as much as R7 000 for a return ticket on the route. Once SA Airlink faced competition, its ticket price dropped to less than R2 000 return. Once Fly Blue Crane announced in January 2017 it was suspending its flights, SA Airlink increased its ticket prices significantly again.
“I believe they were taking advantage because they were no longer facing competition on the route,” said Nontso. He said the Chamber had received several complaints about SA Airlinks’ ticket prices before lodging a complaint with the commission in 2017.
“We believe SA Airlink’s conduct has been harmful to travellers to and from Mthatha as well as potential tourists to the region. We believe the conduct might also have scared potential investors away from the region, which badly needs investment,” he said.
He said travellers would rather fly to East London, for which an air ticket was considerably lower. They would thus rather book into hotels and bed-and-breakfast in the East London region for overnight stays and then drive to Mthatha the following day for business.
SA Airlink CFO De Villiers Engelbrecht told the Tribunal that the Mthatha airport was significantly more expensive to operate compared with other airports due to “pervasive infrastructure“ problems.
These included a lack of weather-monitoring facilities and a lack of fuel storage facilities, which forced the airline to take on more costly Gauteng fuel sufficient for the return flight, which also added additional weight on the flight that increased costs.
Other problems were electricity supply and ongoing threats of the airport’s licence being revoked due to its inability to upgrade fire and emergency services and which saw the airline being forced to operate smaller aircraft.
He said recent management failures at the airport included in 2019 when it closed for six weeks due to inadequate fire and rescue services and there was another interruption for “a few days” in December 2022.
He presented evidence attesting to the introduction of a one-way special low fare of R804 in the 2016 financial year to commemorate the introduction of a third daily, five day a week flight on the JHB-Mthatha flight.
He said SA Airlink historically developed its own routes regionally, at great cost usually through discussions with business chambers and other institutions in the town or city of the new route, and new routes were introduced at a loss until passengers and travel agents trusted the reliability and quality of the airline services.
He said the airline industry in South Africa had not yet reached pre-Covid 2019 passenger levels, and after the pandemic, Airlink began limited flights on the busy domestic routes between Johannesburg, eThekwini and Cape Town.
He said post the pandemic, during which the airline was forced to close for three weeks, it had to regain the trust and confidence of its passengers at all its 53 routes, all over again.
BUSINESS REPORT