Kulula in R1-billion court battle
Airline hoping for victory against SAA after Nationwide finding
NATIONWIDE Airlines’ groundbreaking court victory in which South African Airways (SAA) was ordered this week to pay it R104.6-million plus interest for anti-competitive conduct has given hope to Kulula’s owner, Comair, which has a similar claim, for R1-billion, pending in the high court.
Nationwide’s claim is the first damages suit to be brought based on a finding by the Competition Tribunal of anti-competitive conduct.
Nationwide, now in liquidation, brought the action after the tribunal found in 2010 that SAA had abused its dominant position in the market to divert customers from competitors.
Nationwide’s claim was for R171.5-million in damages, plus interest calculated from 2010 – a total of about R325-million.
In granting the claim, Johannesburg High Court Judge Caroline Nicholls said she agreed with the Competition Tribunal and the Competition Appeal Court that SAA’s abuse of its dominant position – from 2001 to 2005 – had been “the major cause of the decrease in volume of Nationwide’s passengers”.
SAA had argued that Nationwide’s loss of profits was the result of public perceptions of an ageing and unsafe fleet.
Nicholls said the competition authorities had acknowledged the shortcomings in Nationwide’s safety record, but had still found that commission agreements between SAA and travel agents had diverted customers away from competitors – a “prohibited practice” under the Competition Act.
“Those are findings which cannot be faulted but, in any event, to which this court is bound,” the judge said. A major part of Nicholls’s judgment focused on how to quantify the amount of damages to be paid – an exercise with “numerous variables to be taken into consideration”, she said.
Essentially, the court had to compare how Nationwide performed versus how it would have performed if SAA had not abused its market position.
Arguments presented by experts on both sides – on which economic models should be used and which variables should be considered – yielded very different amounts.
After a detailed assessment, Nicholls for the most part agreed with Nationwide’s expert witness.
However, she adjusted the amount downwards to take into account a strike at SAA in July 2005 and made a 25% deduction for “contingencies”. – BDlive