Airlink might have been exploiting people in the Eastern Cape region — one of the country’s poorest areas — with its high flight ticket prices, the Competition Tribunal has heard.
At the same time, the OR Tambo District Chamber of Business based in Mthatha is pleading with Airlink to drop its prices to remain as operator on the Mthatha-Johannesburg-Mthatha route due to its trustworthiness.
“We like Airlink and we want to work with them but Airlink is on an island which doesn’t communicate with us [to find solutions],” Dr Andile Nontso, the chamber’s secretary, said on Monday.
Nontso gave evidence on behalf of the chamber, which together with businessperson Khwezi Tiya and the airline Fly Blue Crane accused Airlink of excessive and predatory pricing between 2015 and 2017.
The complainants allege that SA Airlink’s prices (the airline in 2020 became known as Airlink without the prefix) were excessive before Fly Blue Crane entered the route in October 2016. It was also alleged SA Airlink then lowered its prices below its costs (predatory pricing) and went back to their exorbitant prices (excessive pricing) after Fly Blue Crane exited the route in January 2017.
In 2018, the Competition Commission found 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. The Commission also found that consumers would have saved between R89m and R108m if the airline was not priced excessively on this route.
The commission found Airlink engaged in predatory pricing in that it priced tickets below its average variable costs and average avoidable costs for some of its flights after Fly Blue Crane entered the route as competitor. The commission was seeking an administrative penalty of up to 10% of SA Airlink’s annual turnover for both the conduct of excessive pricing and predatory pricing. The findings were then referred to the tribunal for a final decision.
Airlink says it is unfairly criticised by the chamber while the airline cannot be held responsible for a variety of shortcomings at the airport such as the poor state of the airport’s facilities. The airline continued its scheduled flights between Mthatha and Johannesburg despite the airport being downgraded to a category four airport.
Being downgraded meant only limited size aircraft could land there due to problems with the availability and serviceability of emergency services. The airport was closed down temporarily by the SA Aviation Authority in 2019 and in 2022 for noncompliance to minimum emergency standards.
“We have looked at the privatisation of the airport or possibilities of Acsa running it because there is just too much corruption in the provincial government [which owns the airport].”
Nontso told the tribunal that customers and businesspeople from Mthatha and surrounding areas would increasingly rather drive to East London because it was cheaper to fly from there. In the process, Mthatha businesses lose out on those customers rather spending their money in East London on accommodation and shops, while it restricts its growth in the tourism sector.
“East London is making money because of Mthatha’s residents and it should be the other way around,” Nontso said. “OR Tambo is one of the biggest regions in the country and we have 207 towns in the area shopping in Mthatha. We want to be attractive as a destination for more economic growth. Maybe Airlink can subsidise our flights by charging more on its regional flights to other countries.”
Currently the road between Mthatha and East London is in bad condition and the whole situation limits growth in the OR Tambo region, one of the poorest regions in the country.
When Fly Blue Crane started operating the route, it initially offered flight tickets as low as R799. This later settled between R2,500 and R3,000 after Airlink also lowered its prices. After Fly Blue Crane withdrew, the prices sometimes shot up to R7,000 which just became too expensive for smaller businesspeople.
More airlines offer more competitive ticket prices from East London, whereas customers have no choice but to pay Airlink’s prices should they have to travel from Mthatha. But because of the state of the Mthatha airport the cheaper airlines are not allowed to land there.
According to advocate Mark Wesley, who led evidence before the tribunal, it is unfair for Nontso to compare airports with East London, being a category seven airport with fully functional services. Apart from that, the passenger demand in Mthatha is significantly lower than in East London.
Nontso said he could not comment on the reasons for the pricing. For his chamber it was about the principle of Airlink dropping prices while it had competition, and then raising it again after Fly Blue Crane left. SA Express, which also operated on the route for a short while, has also gone out of business since.
Airlink CFO De Villiers Engelbrecht said in his evidence that Airlink had gone out of its way to improve problems at the Mthatha airport. It installed a weather station, which its former competitors also benefited from.
Because of electricity interruptions plaguing the airport, Airlink installed a solar farm adjacent to the airport in the past 12 months. Airlink needs to restrict its operations to and from the airport because the landing lights are not functioning.
“We have to carry sufficient fuel for a return flight [because there are no fuel supplies or services] as well as for possible diversions. We carry the additional operational costs for flying with more fuel. We also have to carry the risk with the threat of the airport being closed down again due to noncompliance.”
The hearing continues Thursday.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.