Struggling SAA slapped with R1.16 billion fine

4 months ago written by
South African Airways SAA

In the latest kick up the arse for South African Airways (SAA), the mismanaged national carrier will have to pay competitor Comair a total of at least R1.16 billion for anti-competitive behaviour.

The shocking blow comes as the South Gauteng High Court passed an order this week after a long and complex court case. In the order to pay a fine, the court ruled SAA should pay Comair R554m plus interest at 15.5% for engaging in anti-competitive behaviour through the incentives it offered travel agents between 1999 and 2005. Compounded the total amount to be paid could reach well over R1.16 billion.

TourismUpdate.co.za quotes Erik Venter, CEO of Comair, as saying Comair pursued the case “because a dominant carrier had abused its position in the market to the detriment of its competitors, their shareholders and employees and the flying public”.

In their response the cash-strapped SAA said through its spokesman Tlali Tlali “it is important to note that this is one of the legacy matters implemented by the then management team. All of those managers left the company a while back and new business management processes were since introduced to ensure compliance with all relevant prescripts”.

While Comair warned its shareholders SAA may appeal the judgment, the civil claim once again raised fears that yet another government bailout would be required to keep SAA solvent – and in the air.

In September of last hear SAA was slapped with a list of stringent conditions by the Treasury before it was given a further R4.7bn bailout guarantee. At the time the SAA board agreed to proceed with a process to stabilise operations and finances, including possible rationalisation of three state-owned airlines. They will report back to parliament about their progress next month.

In August last year (2016), Nationwide Airlines – which went into liquidation in 2008 – won a similar claim for R325m against SAA. SAA claims it settled the case.

Both Comair and Nationwide’s civil claims were based on a 2006 Competition Appeals Court ruling, which found that SAA had engaged in anti-competitive behaviour by paying commissions to travel agents to incentivise them to divert customers to SAA flights.

The civil litigation was the first based on a Competition Tribunal ruling.

Legal counsel for SAA will study the judgment and advise the company on how to proceed.

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