Competition Tribunal looks at Lanseria

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The Competition Tribunal says it has received and is processing a claim from low-cost airline 1time against rival Comair about the exclusive use of Lanseria International Airport west of Johannesburg.

1time yesterday said it was taking its complaint regarding the agreement to the Competition Tribunal itself following a decision by the Competition Commission not to do so.

The airline is eager to gain access to Lanseria as it offer passengers a cheaper and more convenient alternative to Airports Company SA’s OR Tambo International Airport, Business Day reports. Comair has a five-year agreement, due to expire next year March, with Lanseria to use the airport exclusively for kulula flights to Durban and Cape Town.

But after an 19-month investigation, the Competition Commission found the agreement not to be anticompetitive. 1time Holdings CE Glenn Orsmond says his airline is concerned that if the scheme is not challenged, Comair and Lanseria might renew the deal, again denying 1time access to Lanseria.

In its ruling, the commission said that while the agreement “indeed has the effect of substantially preventing competition in the domestic airline market”, it found it was not anticompetitive as the exclusive agreement was “necessary to enable kulula to break even”.

Spokeswoman Nandi Mokoena said yesterday the commission had decided not to refer the complaint to the tribunal because the nature and duration of the five-year agreement between Lanseria and kulula was justified on the grounds of the risk and substantial investment which both parties took on when entering into the arrangement.
“Furthermore, the agreement was set to end in 2011. Although the commission felt the arrangement between kulula and Lanseria was justifiable under the circumstances, we made it clear to the parties that an arrangement which went beyond the duration of five years would be unlikely to bear up to the same scrutiny,” Mokoena said.

Comair joint CEO Gidon Novick said that Comair’s use of Lanseria had provided passengers with a cheaper alternative to costly OR Tambo International Airport. Orsmond contests this, saying 1time can submit a 60-day sample showing that prices at Lanseria were 30% higher than those at OR Tambo. “Comair has often publicly said that operating costs at Lanseria were substantially less than at OR Tambo … yet their fares are on average 30% higher than at OR Tambo.
“The effect of these existing arrangements is that a large group of passengers is denied a choice of airline and the opportunity to access cheap flights. Kulula passengers will continue to pay 30% more to fly from Lanseria.” News service Inet-Bridge added Osmond continued that the “exclusive agreement will deny thousands of supporters the opportunity to access cheap flights from Lanseria during the World Cup,” in June and July.

Novick in turn said two airlines – Sun Air and Nationwide – had previously failed to operate profitably from Lanseria. “The rationale for the agreement was related to the risk we took on the airport, including installing check-in equipment and other technologies as Lanseria previously had none. “In the end the commission agreed with us that we had to be compensated for the risk we took.”



Pic: A kulula airliner, dubbed the “camoplane” taking on passengers at Lanseria airport in October 2009.