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SAA to pay huge damages to Nationwide

‘Precedent set for Comair claim of more than R1 billion’.

Embattled national carrier South African Airways (SAA) has been slapped with a court order to pay more than R104 million to liquidated airline Nationwide, for damages caused by SAA’s abuse of market dominance from 2001 to 2006.

This is only the second claim of its kind in South African Competition Law and the first time a damages claim based on a finding by the Competition Tribunal has been litigated. It sets a precedent for a claim by Comair against SAA for the same conduct said partner at law firm Bowman Gilfillan Lucinda Verster, who represented Nationwide and its liquidators, .

The Comair claim amounts to R870 million plus interest and could total around R1.5 billion. Closing arguments in this case will be heard from August 22.

As was the case in the Comair claim, the Competition Tribunal has already ruled in Comair’s favour on the merits and only the extent of the damages remains to be determined, Verster said.

The Nationwide award comes as a leaked SAA quarterly report for the three months ended June 30 showed the airline made a R1.3 billion loss for the period. It has utilised all but R99 million of its State guarantees of more than R14 billion and National Treasury has been slow to respond to a request for a further R4.5 billion guarantee submitted late last year.

Finance minister Pravin Gordhan last week publicly repeated his earlier position that the SAA board under chairperson Dudu Myeni should be replaced.

Verster, who has been on Nationwide’s legal team dealing with the matter over the past 14 years, told Moneyweb that the Tribunal, Competition Appeals Court as well as the South Gauteng High Court found that if it were not for SAA’s unlawful conduct, Nationwide could have survived. It stopped operating in 2008 and subsequently liquidated.

Verster said the court made the award on Monday. It consists of R104.625 million, plus interest, the cost of the advocates and the cost of international experts who came to South Africa to testify on behalf of Nationwide.

The money will be distributed among Nationwide’s creditors, the biggest of whom is one of its former directors, Vernon Bricknell, Verster said.

Verster said SAA’s unlawful conduct entailed incentives offered to travel agents between 2001 and 2006, which resulted in them selling SAA flight tickets, rather than that of Nationwide and Comair.

SAA was found guilty of similar conduct between 1999 and 2001. A R43 million damages claim by Nationwide stemming from that ruling was settled between the two airlines on a confidential basis shortly after the trial commenced in 2006.

Asked what recourse Nationwide would have if SAA failed to pay the amount, taking into account its precarious financial situation, Verster said there are various options open to her clients, including an application for the liquidation of SAA.

Corporate Governance expert at Ratings Afrika Charl Kocks told Moneyweb the prospects of such an application would firstly be dependent on SAA’s Memorandum of Incorporation (MOI). “The South African National Roads Agency (Sanral) for example has a provision in its MOI that precludes having it liquidated. One doesn’t know whether the SAA MOI has a similar provision,” he says.

If not, the applicant would still have to convince the court that liquidation would be the best option for the shareholder and creditors. Government is the only shareholder in SAA. He said courts are reluctant to order the liquidation of State-owned companies.

He says since SAA has failed to publish its financial statements for 2014/15 and 2015/16, the extent and nature of its unencumbered assets is unclear.

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If SAA is guilty of illegal or unlawful acts as this article suggests, then these acts should be isolated, highlighted, and those responsible charged criminally to answer for their actions. Their legal costs should be for their own account. Everyone who acted in this manner should be charged. Whether or not they still work for this bandit company or have moved on. Furthermore, travel agents who received or benefited from these unlawful incentives should be named, shamed and made to pay back the money with interest. If it is found that a director or executive was involved in this or any other unlawful activity, then they should be prohibited from acting in that capacity anywhere in South Africa for life. Otherwise we will just find them in some other state organisation having been promoted to another position.

The time is now to curb and stop the rot in state institutions.

We pay for all inefficiency or protective practices by SAA. This may be through higher priced tickets or through taxes that could have been employed elsewhere. Ironically it is the poor that need those taxes most.

Destruction of competition creates inefficiency. This applies equally to “monopolistic” capital and “monopolistic” state enterprises.

We pay for all ANC government inefficiences which run into billions of rands.

Liquidate this dinosaur and sell off the routes to the remaining private companies. SA would save millions not supporting this SOE and the companies who own the new routes should be insensitivised to bring in lots of visitors. If they fall below a set number they should be forced to sell the route to someone who can bring in the numbers.

Our tourism sector has been held back by this company sitting on routes it does not exploit.

While you are into privatization how about the Airports company as well? They exploit their monopoly and push up the price of tickets.

I totally agree with Sweetpea that CEO’s and managers etc. have to be criminally charged for incompetence, but remember they are all ANC and ZOOma cardres!! There’s no hope of prosecuting them and getting them into a court!!!

It’s a disgrace that parliament agreed to extend the deadline for SAA’s submission of its financial statements; parliament was found wanting by the Constitutional Court quite recently but it seems MPs have not learnt their lesson.

Parliament’s granting of the extension of the deadline is enabling SAA to falsely create the impression that it’s a going concern while most likely, it isn’t. Is it servicing its debt?

Sorry but incompetence doesn’t qualify as a crime. Fraud yes, but not incompetence. There’s no indication of fraud at SAA that I’ve heard of.

I would bet quite a large sum on there being some fraud (self-enrichment perhaps) at SAA.

Everything a government touches turns to crap – Ringo Star.

Ah – the luminaries of SAA ( and the ANC hierarchy) do it again.
Home run boys!

It never gets better, does it? They appoint clueless people to the board, including Zuma’s lady friend, who knows nothing about airlines. It’s rather like taking a straight E high school science matriculant and making him/her head of quantum mechanics at a university. Trouble with that is that all they know is that Quantum is the word on the back of a Toyota taxi.

This anti-competitive practice by SAA has damaged the tourist industry and thereby the economy of South Africa. The company and the individuals who control it should be prosecuted for this.

SAA and other ANC government departments don’t actually care about fines as the taxpayer just has to pay! They just get a “Masipa” (slap on the wrist) and carry on with the disgusting, fraudulent and irresponsible conduct! A tax revolt has started and will get worse until there is a clear turnaround and “people” are held accountable with serious consequences for their actions.

Parliament’s recent extension of the deadline for SAA to submit financial statements – after several earlier extensions – is unacceptable; all it does is allow SAA to carry oh operations while in fact it’s bankrupt. Operating in this way is illegal.
Would have thought MPs would have taken greater care after the recent Constitutional Court judgement against parliamentarians.

wrong heading – should read SA TAXPAYERS TO PAY HUGE BAIL-OUT FOR SAA!

Incompetents in charge mean a little more time to steal a lot more money……

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