IAC urges commission to investigate SAA Cargo’s pricing

IMPERIAL Air Cargo (IAC), part of the listed Imperial Holdings group, has made an urgent request to the Competition Commission to initiate a market inquiry into abuse of dominance and predatory pricing by SAA Cargo in the overnight express airfreight market.

It alleges SAA Cargo, in an attempt to eliminate IAC – its only competitor in this market, has kept its rates artificially low to the extent it was not covering its overhead costs and making an acceptable return on investment. Cobus Rossouw, the chief integration officer of Imperial Logistics, claimed yesterday that SAA Cargo had frozen its prices since April 2012 despite the impact of increased costs and a deteriorating exchange rate.

Rossouw said there were compelling grounds to justify the commission launching an inquiry into this market on an urgent basis.

“Our intention is to draw the commission’s urgent attention to non-commercial conduct and structures that are preventing, distorting and restricting competition,” he said.

Rossouw said it had made the urgent request and handed its 80-page submission to the commission last week.

The commission had acknowledged receipt of it, but indicated that it did not have the capacity to address a market inquiry on an urgent basis and suggested IAC lodge a complaint.

IAC did not want to lodge a complaint because it would only result in a fine that would be paid by taxpayers, he said. “We can’t operate in a market on this basis. They can’t just give [SAA Cargo] a penalty. We need a change in the market.”

Tlali Tlali, an SAA spokesman, said SAA Cargo had not received notification of IAC’s request to the commission and would respond once it had received the notification and was required to respond.

“In our view, all operations at SAA Cargo have always been above board. These include the adjustments we have been making on pricing. We confirm that increases in pricing have occurred in the normal course of running operations at SAA Cargo,” he said.

Rossouw said IAC’s published rates increased by 10 percent and, while SAA Cargo had introduced a 6 percent increase in its rates this month, it had at the same time increased the discount available to its select customers.

He said IAC believed SAA Cargo was cross-subsidising its overnight cargo from its daytime service.

Rossouw said the overnight express airfreight market was worth about R500 million annually and IAC and SAA Cargo operated three Boeing 737’s each.

Rossouw said IAC’s market share had shrunk from about 60 percent to 50 percent in the past 18 months because of SAA Cargo’s conduct.