Commission probes alleged collusion among airlines

The Competition Commission is probing major airlines BA/Comair, South African Airways, 1Time, SA Airlink, Mango and SA Express for allegedly colluding on prices and pricing strategies ahead of the Soccer World Cup, the organisation announced on Thursday.

Many of the airlines the Mail & Guardian spoke to had just heard about the investigation and were compiling their responses.

The investigation appears to be based mainly on information submitted by South Africa Airways (SAA) in December 2009, in exchange for leniency from prosecution under the Competition Act.

This comes after the Office of the President in November 2009 requested the commission to look into concerns that airlines planned to escalate their air fares during the Soccer World Cup, the commission said in a press statement.

As part to the deal SAA has been forced to give its “full cooperation”, revealing an email between airlines discussing ticket pricing during the World Cup.

Email correspondence between the airlines show that the airlines might adjust fares ahead of the World Cup. In particular, the email suggests that since there is no indication as to which flights will represent peak demand flights, airlines have the option to not provide any flights for sale until such time, or price all flights at peak-time rates until “such time as they have greater certainty”.

The investigation has spurred fears that average South Africans will face sky-high prices for flights across the country.

The email, which is in possession of the commission, also suggests that air fares will have to be raised in order to cover other various anticipated additional costs.

‘The Soccer World Cup tournament provides South African business with a good opportunity to showcase our international competitiveness, an opportunity which could have positive and lasting benefits. But it is also possible that some firms might want to exploit the situation by engaging in anti-competitive conduct. The commission is obliged to investigate all legitimate complaints in such instances,’ says commissioner Shan Ramburuth.

According to the commission, it will investigate the allegations made by SAA and circumstances surrounding the allegations to determine if the airlines have colluded to increase prices or adopt similar pricing strategies ahead of the World Cup. If it finds that they have, the commission will refer the case to the Competition Tribunal for a hearing and request an appropriate penalty.

SAA was unable to comment immediately on the investigation, while a spokesperson from Comair, which owns British Airways, said it was the first time she had heard of discussions about World Cup pricing.

“If only we were such good friends that we could collude,” said Heidi Brauer, head of marketing at Comair Limited. Formal comment would come from the group’s CEOs soon, she said on Thursday afternoon.

Meanwhile, 1Time group CEO Glenn Orsmond laughed off the allegations, saying his group had “never ever been involved in pricing talks” with the other airlines.

“I haven’t even met these guys, there’s absolutely no substance to this from our side at least.”

According to Orsmond, all the other airlines fingered in the investigation belong to the Airlines Association of Southern Africa (AASA), which holds regular talks. However, 1time is not a member. “They may have made a mistake by including us,” he told the M&G.

He said pricing collusion has occured in the past within the AASA.

However, Brauer said she was not aware of this. Comair’s financial director represents the group at AASA meetings. “I do know that the airport tax issue is a hot topic right now.”

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