The Competition Tribunal has recently begun hearings against local airline Airlink (formerly known as SA Airlink) over allegations of predatory and excessive pricing on its Johannesburg-Mthatha-Johannesburg route. This action follows a 2018 investigation by the Competition Commission, which discovered evidence that Airlink had overcharged its customers, leading to the departure of its competitor, Fly Blue Crane, from the same route.
Three separate complaints filed by local businessman Khwezi Tiya, Fly Blue Crane, and the OR Tambo District Chamber of Business triggered the Competition Commission’s investigation. Airlink was accused of violating the Competition Act and abusing its market dominance on the Johannesburg-Mthatha-Johannesburg route as well as in the regional airline market in the complaints.
Excessive pricing, as defined by the Competition Act, is the practise of charging customers unreasonably high prices for goods and services, causing them harm. Predatory pricing, on the other hand, occurs when a company lowers its prices below its average variable costs and average avoidable costs in order to eliminate competition.
Airlink was accused of predatory pricing between September 2012 and August 2016, during which time the airline was accused of charging customers inflated prices. Fly Blue Crane entered the domestic airline market in 2016, operating low-cost flights between Johannesburg and Mthatha, among other destinations.
Airlink is accused of using predatory pricing tactics shortly after Fly Blue Crane entered the market. Airlink reportedly forced its competitor out of business by offering flights at prices lower than their average variable and avoidable costs. Fly Blue Crane was placed in business rescue in January 2017, and its flight operations were suspended in February of that year.
According to the Commission’s 2018 report, Airlink’s exorbitant pricing cost customers between R89 million and R108 million over a five-year period. These findings indicate that customers could have saved a significant amount of money if the airline had not engaged in overcharging practises.
Furthermore, the report revealed that Airlink’s predatory pricing actions could discourage future competition from other airlines on the Johannesburg-Mthatha-Johannesburg route. The Commission subsequently charged Airlink in 2018 and sought an administrative penalty of 10% of the airline’s annual turnover, leading to the matter being referred to the Competition Tribunal.
In response to the allegations, Airlink has firmly denied any wrongdoing and contested the charges brought against it. The Competition Tribunal hearings are currently underway, with more developments expected in the coming days.
Despite efforts to obtain Airlink’s official comment on the matter, no response was received at the time of publication. Finally, the Competition Tribunal’s hearings shed light on Airlink’s alleged predatory pricing practises, which have sparked debates in the airline industry about fair competition and customer welfare. As the investigation progresses, the findings could have serious consequences for the airline’s reputation and future operations.
