Competition authorities warn about effects of SAA lifeline

THE Competition Commission has added its voice to concerns market players have expressed about the effect the latest lifeline of R5bn to state-owned South African Airways (SAA) could have on independent and low-cost airlines.

Deputy commissioner Tembinkosi Bonakele said yesterday the commission could not stop the government as a shareholder from giv- ing financial support to the companies it owned. But itwould need to be careful not to cause the demise of independent airlines.

“They have shown the real benefit of competition by offering low prices,” Mr Bonakele said.

“Consumers can feel it (in the price of tickets) on routes where there is no competition.

“Consumers will feel it more if these low-cost airlines disappear.”

The Treasury announced this week it had issued SAA with a letter of guarantee for R5bn, allowing it to borrow in the financial markets to buy new aircraft.

Comair CEO Erik Venter said his company would challenge the government guarantee for SAA.

He referred to aviation transport policy developed after the deregulation of the domestic airline industry in 1992.

The policy included a provision that SAA could not receive government funding or guarantees as long as private competitors were required to rely on commercial funding.

Comair and liquidated Nationwide Airlines are suing the national carrier after the Competition Tribunal found it guilty of abusing its dominant market position. This it allegedly did through inducing travel agents not to sell domestic air tickets for SAA’s competitors.

SAA was earlier served with a summons from liquidated Nationwide Airlines claiming more than R155m in damages.

Mr Venter said this week in a statement a private airline could not sustain the losses SAA and its low cost airline Mango incurred in the domestic market. The losses had been incurred to protect SAA’s market share at the expense of its competitors and the taxpayer.

“We do not see any controls in place that will prevent this from happening again,” Mr Venter said.

Mr Bonakele said all airlines were experiencing tough times partly because of the high fuel costs.