SA Airlink’s predatory conduct led to folding of Fly Blue Crane

JOHANNESBURG- The Competition Commission has referred the South African (SA) Airlink to the Competition Tribunal for prosecution of charges excessive and predatory pricing on the Johannesburg-Mthatha route.

Complaints were lodged against businessman Khwezi Tiya by Fly Blue Crane and the OR Tambo District Chamber of Business between 2015 and 2017. It is alleged the Airlink had lowered its air prices below its cost, which is referred to as predatory pricing, when Fly Blue Crane entered the route. The final claim is that SA Airlink increased their air prices to high numbers after Fly Blue Crane exited the route in January 2017.

Fly Blue Crane entered the market with pricing  at one way trip for  R799 , while SA Airlink offered a return trip at R4,000 reported by DispatchLIVE in 2017.

Blue Crane entered the market, Airlink introduced a third flight and halved their prices to R2,000.

The Competition Commission said about their investigation on Wednesday:

– SA Airlink contravened the Competition Act by abusing its dominance from September 2012 to August 2016 by charging excessive prices on the route to the detriment of consumers;

– Consumers would have saved between R89m and R108m had SA Airlink not priced excessively on this route;

– Lower prices would also have resulted in more passengers travelling by air on the route‚ possibly contributing to the local economy of Mthatha;

– The airline engaged in predatory pricing in that it priced below its average variable costs and average avoidable costs for some of its flights.

– The predatory pricing conduct of SA Airlink contributed to the exit of Fly Blue Crane‚ their only competitor at the time on the Johannesburg-Mthatha route; and

– The effect of the predation is also likely to deter future competition on this route from other airlines.

The commission wants SA Airlink to face a administrative penalty of 10% of their annual turnover for their conduct of excessive pricing and predatory pricing, as they view their conduct having a negative affect on the route.

Photo Credit- TimesLIVE

List appeared in TimesLIVE Business

 

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