Business

Airlines deny World Cup price-fixing

17 March 2010

South African Airways (SAA) and SA Express have denied allegations of price-fixing around the Fifa World Cup, while dismissing calls to slash their fares during the month-long tournament.

"I can say categorically that at no stage was SAA involved in discussions with any other airline competitor, or otherwise with regard to pricing around the World Cup," acting SAA CEO Chris Smyth told Parliament's portfolio committee on public enterprises in Cape Town on Tuesday.

The airline endured grilling from Democratic Alliance MPs as to why, on key dates like that of the quarter final, semi-final and final of the world's biggest football tournament, SAA ticket prices routinely came to more than R3 600 while British Airways was charging just R881.

This appeared to echo part of the complaint to the Competition Committee that the airline had priced its full flight inventory at peak rates until it knows when peak demand would be.

"It is not a case of tripling prices. The range of pricing is very wide," Smyth objected, pointing out that tickets ranged in price from R3 600 to R887.

"You are talking about a five times differential," he said, adding that if demand failed to materialise, the airline would introduce cheaper tickets, subject to certain restrictions, to get a stable booking profile.

SAA business development chief Jason Krause denied SAA had increased its fares across the board for the World Cup, saying this only applied to the "everyday fare" in both economy and business class.

"SAA's fares on domestic fares are not the highest. We are actually cheaper than at least one other carrier."

Tour operator bookings

Krause added the national carrier had sold a "significant amount" of its capacity through tour operators as part of international bookings.

"Those fares would have been as discounted fares. On certain days, on certain routes, based on demand and our ability to supply seats which may be diminished, for instance because we have sold a significant amount through tour operators already, it is true that we will be higher than other carriers."

Krause added that when doing its pricing the airline had looked at ticket prices during the 2007 Cricket World Cup and at fares that a passenger would pay if flying a similar stretch inside Australia or the United States.

In both cases pricing for the World Cup was somewhat lower, he contended.

Siza Mzimela, the outgoing CEO of SA Express who will take over from Smyth at SAA in April, also firmly denied that they had colluded on prices.

Recovering costs

Mzimela pointed out the pricing was in part designed to recover the additional costs the airline would incur from flying supporters to matches, then returning to base empty to fetch the next batch of spectators.

"In order to carry the second load of supporters who want to go to Bloemfontein we will be flying the aircraft empty. It will just be the pilot flying all the way back to pick up the second group.

"Either you utilise price to ensure that you still cover your cost or use a more aggressive management system to ensure that ultimately you are still able to cover your costs."

Mzimela rejected a call by IFP MP Mario Oriani-Ambrosini that the airline should charge a discounted rate of R500 for all domestic flights during the World Cup.

It would mean operating at a loss, and as the company's sole shareholder the government could not reasonably expect SA Express to do so.

The Competition Commission late last year began investigating SAA, BA/Comair, 1Time, Mango, SA Airlink and SA Express after concerns were voiced over ticket prices being manipulated to maximise profits from the world's biggest soccer tournament.

Sapa