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- Comment from the airline.
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 recommendation 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 up to $7.56 million.
South Africa's largest carrier, Airlink, has appeared before the Competition Tribunal as it faces allegations of excessive and predatory pricing on a domestic route from 2012 to 2016 on a domestic route between Johannesburg and Mthatha in the Eastern Cape.
The Tribunal opened a hearing case following a recommendation by the Competition Commission to prosecute the airline (formerly known 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 in the Eastern Cape Province of South Africa and the capital of OR Tambo District Municipality (not to 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).
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 is 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. According to the Commission, lower prices would have saved customers up to $7.56 million (R108 million) at the time. Besides saving millions, lower prices would have resulted in higher traffic on the route.
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Driving out competition
SA Airlink was also accused of predatory pricing to drive out its sole competitor by pricing some 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.
Following the investigation, the Commission referred SA Airlink to the Tribunal for prosecution, seeking an administrative penalty of up to 10% of the regional carrier's annual turnover for all allegations. Fly Blue Crane entered administration in 2016 and has not operated flights since February 2017.
Conversely, Airlink continues to operate scheduled flights from Johannesburg to Mthatha. It operates ERJ-135LR flights between the two destinations and remains the only carrier serving the route.
UPDATE: 2023/08/14 13:40 EST BY TATENDA KARUWA
Comment from the airline.
Upon reaching out for comment, Airlink said;
"Numerous factors must be considered when examining the complex economics of operating an air route. We disagree with the Competition Commission’s recommendations along with the logic underpinning them. However, the Competitions Tribunal presents us with an opportunity to challenge those recommendations. We are doing so by putting forward our argument backed by supporting evidence, which we believe will demonstrate Airlink competed fairly on the Johannesburg-Mthatha route and has always provided reliable, convenient, and safe air services at economically-sustainable fares that represent good value."
Case against SAA
Airlink recently concluded another case in the South African High Court in an attempt to recover over $50.5 million (R890 million) in ticket revenue from its former franchise partner South Africa Airways
Airlink argued that payment of flown ticket revenue and unflown ticket liability should not have been included in SAA's business rescue process and that SAA is liable for the payment of the figure mentioned above. However, the court dismissed the case with costs, citing that Airlink's claims were pre-commencement claims and did not qualify as post-commencement claims.
The airline welcomed the decision, as Airlink CEO Rodger Foster said in a statement, "Airlink respects the court's decision; it is, after all, the duty of the company's leadership to explore every available avenue to recover the funds. Meanwhile, we will continue to focus on growing Airlink as an independent, financially robust, commercially vibrant, competitive, and sustainable airline."
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Source: News24, ch-aviation