Nationwide wins SAA anti-competition case; awarded $7.8mn

A South Gauteng High Court has awarded Nationwide Airlines (CE, Johannesburg O.R. Tambo) ZAR104.6 million (USD7.89 million) in damages plus interest after ruling that South African Airways (SA, Johannesburg O.R. Tambo) practices did breach South Africa's Competition Act and did inflict financial harm on Nationwide.



Now in liquidation‚ Nationwide based its case on a 2010 Competition Tribunal finding that SAA abused its dominant market position to divert customers from competitors. It claimed that between June 2001 and March 2005, SAA had violated the terms of the country's Competition Act by paying commissions to travel agents thus diverting passengers away from competitor airlines. 

SAA allegedly signed "override incentive agreements" with travel agents where the latter earned a percentage commission of the sale price. When sales reached a certain target set by SAA, an additional incentive was paid. There were also "trust agreements", to reward travel agent loyalty, Nationwide claimed.

In its defense, SAA argued that Nationwide's losses were as a result of its public perception of an ageing and unsafe fleet.

However, according to BusinessDay, in her ruling, Judge Caroline Nicholls said the Competition Tribunal and the Competition Appeal Court had acknowledged the shortcomings in Nationwide’s safety record, they had still determined that SAA’s abuse of its dominant position was "the major cause of the decrease in volume of Nationwide’s passengers".

In quantifying the damages to be paid to Nationwide, Judge Nicholls extrapolated how the carrier would have performed had SAA not curtailed its business. While Nationwide had claimed ZAR171.5 million (USD12.94 million) in damages‚ plus interest calculated from 2010 — a total of about ZAR325 million (USD20.36 million) — Judge Nicholls adjusted the amount downwards to take into account a strike at SAA in July 2005 and made a 25% deduction for "contingencies".

She subsequently awarded Nationwide ZAR104.6 million (USD7.89 million).

This suit is one of several Nationwide has filed against SAA in recent years. Previously, SAA had settled for an undisclosed amount outside court for damages relating to the period from 1999 to 2001.

As such, this week's ruling sets a precedent for another anti-competition suit filed against SAA by its largest rival, Comair (South Africa) (MN, Johannesburg O.R. Tambo). There Comair is claiming damages of ZAR870 million (USD65.6 million) plus interest and could come to around ZAR1.5 billion (USD113.1 million). Closing arguments in this case will be heard from August 22. As with the Nationwide case, the Competition Tribunal has already ruled in Comair’s favour.

(culled from www.ch-aviation.com)