Monday, September 23, 2013

■ SOUTH AFRICA: Imperial Logistics accuses SAA Cargo of anti-competitive practices.

South African logistics and freight specialists, Imperial Logistics, has joined the growing list of South African private firms taking action against state-backed carriers with a request to the Competition Commission of South Africa to initiate a market inquiry into alleged anti-competitive behaviour by South African Airways' (SA) freight division, SAA Cargo, in the domestic overnight express airfreight market.

Mr Cobus Rossouw, the chief integration officer of Imperial Logistics, said that with the industry in a state of "escalating crisis",  it is his firm's intention to draw the Commission’s urgent attention to "non-commercial conduct and structures that are preventing, distorting and restricting competition". He stressed that this has serious implications not only for the market concerned, but also for related industries, and for South Africa’s economy as a whole. 
The ramifications are far reaching. It is clear that, if unresolved, this crisis is likely to negatively affect key sectors of South Africa’s economy due to the significant knock-on effects with regard to productive capacity, efficiency and pricing of goods and services in general,” he said.
Imperial Logistics says it has furnished details of alleged non-competitive conduct by state-funded SAA Cargo, which is the dominant player in this market, alongside only one private operator, Imperial Air Cargo (IAC), to competition commissioner, Shan Ramburuth.

Imperial Air Cargo (IAC) is a dedicated freighter operator established in August 2006 and leases three B737-200Fs for night-time operations between Johannesburg, Cape Town, Durban and Port Elizabeth, with road feeder services to East London, George and Bloemfontein. The company is a joint venture between Imperial Holdings (70%) and Comair Limited (30%), parent company of LCC kulula (MN) and a British Airways franchise.

In its submission, Imperial is said to have outlined SAA Cargo’s alleged failure to pass on to customers increases in major cost drivers such as fuel, landing and handling, air traffic navigation, aircraft leases and the impact of the exchange rate deterioration. 
SAA Cargo has frozen its prices since April 2012, despite the impact of increased costs and deteriorating exchange rates. It has only very recently intimated that it would increase its prices. It is our view that SAA Cargo’s conduct can only be seen as an exclusionary strategy to eliminate the only remaining competitor, IAC, from the domestic overnight express airfreight market. There are compelling grounds to justify the Commission launching an enquiry into this market, on an urgent basis,” Roussow contends.

Failure to do so may result in the overnight express market slipping into a subsidised State-owned monopoly, which would lead to a substantial increase in prices and a reduction in both efficiency and reliability in the domestic overnight express air cargo market,” he concluded.
SAA has not issued an immediate statement regarding the claims.

Comair Ltd, in February this year, dragged the national carrier to court disputing its latest Treasury-backed bail out, which CEO Erik Venter said, "allowed SAA to artificially increase its scope of operations and sustain losses as a result of not operating on a commercial basis."