SAA liable for Nationwide’s R104m losses
Court case sets precedent for future claims
HOPE returned to defunct Nationwide Airlines after the South Gauteng High Court on Monday ruled that SAA was liable for R104 million in losses the defunct carrier had incurred for contraventions of the Competition Act.
The case was the first to be heard in a South African court, after previous ones were settled out of court, and sets a precedent that will open the floodgate for future claims.
The claim is expected to put further strain on the national carrier, which has sought a R5 billion bailout from Parliament’s standing committee on finance last year.
Lucinda Verster, a partner at Bowman Gilfillan Africa Group’s competition practice, and who represented Nationwide, said the case was the first to be fully litigated in South Africa and future cases would rely on the court judgment for reference.
R45m SAA fine in 2008 for anti-competitive conduct
“The ruling means that Nationwide’s biggest creditor, Vernon Bricknell, Nationwide’s founder and former chief executive, will be paid, as well as all Nationwide creditors. My client is happy,” she said on Monday.
The case dates back to the period between June 1, 2001, and March 31, 2005, when Nationwide contended that SAA had impeded its growth by taking passengers away through exclusive agreements with various travel agents.
The Competition Tribunal found the agreements to be a contravention of the Competition Act in 2010 as it induced travel agents to deal with SAA exclusively at the expense of any rivals.
The tribunal said the agreements covered between 56 percent and 76 percent of all travel agents by number and 70 percent and 90 percent when weighted by revenue or passenger numbers.
The tribunal findings were upheld by the Competition Appeal Court.
Nationwide, which ceased operations in 2008 and is under liquidation, sued SAA for a R171.1 million damages plus interest as of 2010, which totalled R325 million.
Central to the case was the quantification of damages, with the parties submitting reports by aviation economists from the UK, Robin Noble; from Oxera Consulting, who testified for Nationwide; and Luisa Affuso, from PwC, who testified for SAA.
In her ruling Judge Caroline Nicolls on Monday ordered SAA to pay Nationwide damages of R104.624m, and that the national carrier should pay interest on the sum of 10.25 percent as from the date of judgment until the date of payment.
Judge Nicolls also ordered that SAA pay Nationwide’s costs on a party and party scale, including the costs of two counsel and the qualifying costs of expert witness, Robin Noble.
She said 25 percent contingency deduction should be applied to the R104m figure in order to make allowance for those passengers who were unaffected by the anti-competitive behaviour.
“I am of the view that Nationwide should be awarded damages in the sum of R104.625m arising out of SAA’s anti-competitive behaviour over the relevant period,” she said, according to court papers.
In 2005, SAA pulled the plug on exclusive deals with travel agents leading to a decision by travel agents to direct business away from them.
In 2008, SAA quietly reached an out of court settlement with Nationwide after the tribunal fined the national airline R45m for its anti-competitive conduct and ruled that its incentive schemes for travel agents had constituted an abuse of its dominant position.