Comair update on price fixing allegations and World Cup pricing

Friday, 29 January, 2010

Comair was informed yesterday via the media of the Competition Commission's intention to investigate whether it and other domestic airlines in South Africa have colluded on ticket pricing for the World Cup. This followed a leniency application filed with the Commission by SAA in December 2009.  Comair has yet to receive a formal complaint from the Commission but has strongly denied taking part in any collusive practice at any time. 

Despite no investigation having commenced, Airlink passed on to the media an e-mail, originating from Comair, on the assumption that this is the basis for the allegations by the Competition Commission.

This e-mail from Erik Venter, joint CEO of Comair, is in response to an e-mail from Pule Selepe of the Department of Transport, advising the airlines that the matter of alleged excessive pricing by the airlines was to be raised at the Aviation Sub-Sector Task Team meeting on 26 November 2009, the following day.

Says Venter "As I could not attend the meeting, the best that I could contribute to the debate was to set out Comair's concerns regarding the World Cup, so that DOT had the benefit of our views.  At no stage have any meetings or discussions been held on working together on joint strategies.”

According to Venter, "The e-mail reflected textbook airline pricing principles that any commercial airline would implement, based on supply and demand, and cost recovery. There is no suggestion whatsoever, of non-standard practices.  In fact, the e-mail clearly states that Comair expects airline ticket prices to fall once the airlines have implemented their extra capacity for the World Cup, and that the pricing is anticipated to average out at the level experienced over a typical South African peak holiday season.”

Comair reiterates that its pricing over the World Cup period is being managed as a function of supply and demand in the same way that its pricing is always done.  It is anticipated that certain days will have excessively high demand and as such more flights have been added and prices have been set at rates consistent with other peak periods like long weekends and special events. (See pricing snapshot below). Likewise it is anticipated that many flights over the period will have very low demand and will be priced at heavily discounted levels, particularly if the estimated number of fans does not materialise. Earlier this week kulula.com ran a sale which covered part of the World Cup period and in which over 100,000 seats were sold at between R299 and R399.

"Ironically, the 'naai jou maatjie' initiative of two fellow domestic airlines attempting to discredit a competitor is proof of the no holds barred aggressive competition in the industry.  We will obviously co-operate fully with any investigation and will continue to focus on the challenge of effectively serving the hundreds of thousands of World Cup fans we are expecting to see," concluded Venter.

kulula pricing snapshot

RouteEventPrice available
Joburg - Cape Town J&B Met R2 499
Joburg - Cape Town World Cup Semi Final R2 299
Joburg - Cape Town World Cup off peak days R719

In Summary

There has been no collusion between airlines around 2010 pricing

  • Following a request by the Department of Transport, Comair clarified its position on the World Cup period, to be incorporated into an industry explanation on pricing dynamics to the DOT at the Airline Subsector Task Team meeting the following day.
  • The explanation email has been misconstrued as collusion between the airlines
  • Much confusion still remains around World Cup air ticket and travel related pricing
  • BA and kulula pricing over the World Cup period will be at peak rates on and around the big games which are no higher than normal peak rates
  • Additional flights will be added if demand materialises and this will further reduce pricing
  • Lower demand seats are being sold over the period at heavily discounted rates
  • Comair is committed to a free market economy and will cooperate fully in any investigation