DA questions SAA extortionate prices World Cup

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The Democratic Alliance (DA) says a party study shows state-owned airliner South African Airways (SAA) are charging between two and three times more than any other airline in the country for flights ahead of the 2010 FIFA World Cup quarter final, semi final and final matches.

“The study shows that SAA’s prices are far off the market equilibrium rate, being charged by commercial airliners in this country,” party tourism spokesman Greg Krumbock. “The implication is two-fold: Firstly, consumers will be driven away from SAA, and the state owned airliner will lose revenue during this period. Secondly, they will scare away potential tourists.
“No wonder SAA’s senior management failed to appear for their scheduled appearance before the portfolio committee on public enterprises this week, to answer questions about their ticket pricing. Our study shows that the cost of flights being charged by SAA the day before major World Cup matches far exceeds the ticket prices of their competitors, hinting that SAA may wait until flights on other airliners are booked up, and then use the resulting monopoly to charge extortionate prices.

Krumbock says it is perfectly reasonable to expect that when demand for a particular product increases in a market, prices will increase too. “The problem is that that it is also evident from our research, exactly what market effect the increase in demand would look like. The increase in ticket prices for three of the other four airliners (British Airways maintain a fixed price throughout) follow similar trends across the four flight dates examined in our survey. These, we can deduce, reflect more or less a market-based change in price. In this context, SAA’s prices are shown up as massively inflated.
“It was initially anticipated that the 2010 FIFA World Cup would attract around 475 000 visitors to our shores. However, this estimate has now been generally reduced to between 300 000 to 350 000 visitors, a reduction of around 175 000 potential tourists. This represents a loss of around 20 000 jobs when the international benchmark of one job for every eight tourists is factored in. While SAA’s exorbitant prices are not the only reason for this very disappointing reduction in anticipated 2010 FIFA World Cup tourists, the above evidence makes it difficult to believe it has not played at least some role in deterring tourists from making bookings. Indeed, we believe SAA’s prices may have been one of the significant factors involved in precipitating this unwelcome decline.”

Methodology of the survey: For flights associated with the quarter final, semi final and final of the World Cup, the DA searched for flights the day prior to the match, from Cape Town to Johannesburg, or Johannesburg to Cape Town (as applicable), and listed the least expensive flights on offer for each airline. “We used a set of flight two months from today’s date, and two months prior to the final, as a control date to assess flight prices prior to the tournament. For this set of flights, we used an aggregate of the Cape Town to Johannesburg and Johannesburg to Cape Town prices, where these two flights were not already equal in price. Prices were obtained from each airline’s website.”

Data sets:

Control data
Route: Cape Town to Johannesburg and Johannesburg to Cape Town (aggregate of both)

Flight date: 11 May

SAA: R730

One Time: R757.50

Mango: R777

Kulula: R519

British Airways: R881

Quarter Final

Route: Cape Town to Johannesburg

Flight date: 1 July 2010

Date of quarter final: 2 July

SAA: R3630

One Time: R1199

Mango: R878

Kulula: R919

British Airways: R881

Semi Final

Route: Johannesburg to Cape Town

Flight date: 5 July

Date of semi final: 6 July

SAA: R3630

One Time: R1499

Mango: R1058

Kulula: R1019

British Airways: R881

Final

Route: Cape Town to Johannesburg

Flight date: 10 July

Date of final: 11 July

SAA: R3640

One Time: R1499

Mango: R1087

Kulula: R1819



British Airways: R881