SA investigates alleged World Cup airline price-fixing

02.02.2010

By Steve Menary
South Africa’s Competition Commission (CC) has started an investigation into price-fixing among six leading airlines that will take thousands of supporters to this summer’s World Cup finals in South Africa.

A probe that started late last year at the behest of the Office of the South African President, Jacob Zuma, and originally only focused on South African Airways (SAA) has now been widened to include BA/Comair, 1Time, SA Airlink, Mango and SA Express.

CC commissioner Shan Ramuruth said: “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 issues.”

In a statement on the investigation, the commission confirmed that the six airlines are now under investigation after an application for leniency by SAA into another probe that began last November.

An estimated 2,000 flights a day are expected to cross South Africa during the month long World Cup according to the organisers and the Office of the President initiated that investigation due to concerns that airlines may push up prices.

In evidence to the commission over this enquiry, SAA provided email communication between the airline and un-named rival airlines that showed indications of possible price-fixing.

According to the commission, the email suggested that ‘since there is no indication as to which flights will represent peak demand flights, airlines have the option to either not provide any inventory for sale until such time, or price all inventory at peak time rates until such time as they have greater certainty’. The commission has interpreted this as suggesting prices will have to be raised to pre-agreed levels by the airlines involved.

The greatest influx of supporters within Europe is expected to come from the United Kingdom, where fans have so far made 41,529 applications for tickets according to FIFA.

England’s first match in the tournament is with the United States on June 12 in Rustenburg. The nearest airport to Rustenberg is Kruger Mpumalanga International Airport but many visitors to the town fly to Johannesburg International Airport.

More than four months before that game, the cheapest price for a return flight from London to Johannesberg according to travel website Expedia is already £1,027. That flight is with Kenya Airlines and involves a stop-off in Kenya. The cheapest direct flight is with SAA and costs £1,169, which is more than half the price of the next cheapest direct flight from British Airways at £2,607.

In a statement, SAA said: “SAA undertook to fully co-operate with the commission in exchange for leniency from prosecution under the Competition Act. SAA can further confirm that discussions with the commission relating to the application are under way and that the airline has the full intention of complying with the legislation."

SA Express strongly denied the accusations, saying: “SA Express is not party to any collusion with other airlines pertaining to pricing strategies during the 2010 world cup tournament. The airline has been involved in discussions, under the auspices of the Department of Transport, regarding capacity requirements for 2010. This was to simply ensure adequate fleet planning. It is also important to note that although SA Express and SAA are alliance partners, they are separate entities that operate independently of each other.”

Other airlines were not available for comment, but British Airways said: “Comair, not British Airways plc is under investigation by the South African Competition Commission. Comair is a BA franchise carrier, an independent, South African based airline [and] offers certain services in BA livery under a franchise agreement.”

The commission is still finalizing the timetable of the widened probe but if evidence is found of price-fixing, the case will be referred to a tribunal and any airlines found guilty would face fines.

  • Justin Arenstein, 03.02.2010 08:18:
     
    CORRECTION:

    Your article incorrectly states that Kruger Mpumalanga International Airport (KMIA) is the nearest airport to Rustenburg.

    The two places are actually almost 800km apart, and are in two completely difference provinces, that don't share any common borders.

    The nearest city to KMIA is Nelspruit (also called Mbombela).
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