Na­tion­wide fights SAA

The now-de­funct air­line wants the na­tional car­rier to pay for ‘abus­ing its dom­i­nance’ in the in­dus­try

CityPress - - Business - XOLANI MBAN­JWA xolani.mban­jwa@city­

Travel agents went all out to hit the [SAA] tar­gets and, in­stead of get­ting ba­sic com­mis­sion, they got big cheques

SAA this week ar­gued that there were no grounds for it to pay now-de­funct Na­tion­wide Air­lines any dam­ages be­cause Na­tion­wide had no au­dited fi­nan­cial state­ments that could be used to quan­tify any losses. This ar­gu­ment was put for­ward by SAA coun­sel Ger­rit Pre­to­rius at the South Gaut­eng High Court in Jo­han­nes­burg this week, where Na­tion­wide’s law­suit, worth R325 mil­lion, was be­ing heard.

The trial, which con­tin­ues to­mor­row, comes af­ter the Com­pe­ti­tion Tri­bunal ruled in 2010 that SAA abused its dom­i­nance by pay­ing com­mis­sions to travel agents to di­vert cus­tomers away from Na­tion­wide and travel with SAA in­stead.

Dur­ing the cross-ex­am­i­na­tion of Ver­non Brick­nell, the founder and for­mer CEO of Na­tion­wide, Pre­to­rius said an­other rea­son the court should ig­nore Na­tion­wide’s dam­ages claim was be­cause the air­line was a loss­mak­ing com­pany that only posted a profit twice be­tween 1995 and 2008.

Pre­to­rius said that even af­ter SAA stopped pay­ing com­mis­sions to travel agents, Na­tion­wide con­tin­ued mak­ing a loss, de­spite a spike in pas­sen­ger num­bers in 2005.

Na­tion­wide is su­ing for the pe­riod 2001 to 2005, when SAA was pay­ing mil­lions of rands in com­mis­sion to travel agents.

SAA pre­vi­ously set­tled out of court when Na­tion­wide sued SAA for the same prac­tice for the years be­tween 1999 and 2001.

Na­tion­wide re­jected SAA’s of­fer to set­tle out of court this time be­cause the of­fer was far below what Na­tion­wide was de­mand­ing – R171.7 mil­lion with 15.5% in­ter­est since 2010, re­sult­ing in a to­tal of R325 mil­lion.

When Pre­to­rius asked Brick­nell why he con­tin­ued to fund Na­tion­wide de­spite mak­ing mas­sive losses, Brick­nell said: “We were hop­ing to turn it around.”

Pre­to­rius said: “In 2005, your li­a­bil­i­ties were more than all your as­sets put to­gether. For Na­tion­wide to be a go­ing con­cern, you had to sub­or­di­nate loans, which meant that other [cred­i­tors] got paid first be­fore oth­ers.”

Pre­to­rius said the air­line’s liq­ui­da­tion was its own do­ing and not as a re­sult of anti-com­pet­i­tive be­hav­iour by SAA.

“In Fe­bru­ary 2006, you com­peted with SAA with no over­ride com­mis­sion. You com­peted on equal foot­ing, but you made a loss of R30 mil­lion,” said Pre­to­rius.

Brick­nell (71) had ear­lier told the court that the loss of Na­tion­wide had left him “dis­il­lu­sioned”, and he blamed SAA for pay­ing hefty com­mis­sions to travel agents, in­clud­ing giv­ing away cars to the best-per­form­ing agents if they sold more tick­ets for flights on SAA routes.

“Travel agents went all out to hit the [SAA] tar­gets and, in­stead of get­ting ba­sic com­mis­sion, they got big cheques. They were not out to sell cheaper tick­ets,” said Brick­nell.

Coun­sel for Na­tion­wide An­thony Gotz said that travel agents, 90% of whom SAA had in its pock­ets, were paramount to Na­tion­wide’s sur­vival and that SAA’s ac­tions were tan­ta­mount to tak­ing pas­sen­gers from his client.

De­spite dom­i­nat­ing 45% of the air­line mar­ket in South Africa, there were no vast dif­fer­ences be­tween the lo­cal routes of­fered by SAA and those of­fered by Na­tion­wide, said Gotz.

Al­though Na­tion­wide’s tick­ets were cheaper, SAA al­ways got more pas­sen­gers.

“As a con­se­quence of SAA’s abuse of its dom­i­nant po­si­tion, travel agents who would oth­er­wise have booked pas­sen­gers on do­mes­tic Na­tion­wide flights were re­quired or in­duced to book such pas­sen­gers on do­mes­tic SAA flights, caus­ing Na­tion­wide to suf­fer a loss of prof­its in re­spect of tick­ets that would oth­er­wise have been sold on do­mes­tic Na­tion­wide flights to such pas­sen­gers, a pro­hib­ited prac­tice un­der the Com­pe­ti­tion Act,” said Gotz.

SAA is fac­ing a sim­i­lar claim for R1 bil­lion from Co­mair, which owns ku­l­, and the case is set to be­gin in May.

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