South African Airways faces a real risk of insolvency and many employees may lose their jobs if the competition tribunal imposes a fine of R100-million on the airline as recommended by the competition commission.
On Saturday, the tribunal heard closing arguments of a case that was initially brought by Nationwide Airlines in April 2000. Nationwide alleged that SAA, the dominant player in the market, was offering incentives to travel agents and their consultants that contravened the Competition Act.
At Saturday's hearing, the tribunal was told that "having regard to all the circumstances referred to, the commission recommends an administrative penalty of R100-million to be imposed on SAA".
The amount of R100-million represents about five percent of the total revenue derived by SAA in the affected line of business during the period June 2000 to May 2001.
The commission said harm had been done to consumers through higher prices and "consumers having to fly at less convenient times than if they had been offered an unbiased selection of ticket options".
It said: "The competitors of SAA suffered considerable losses in revenue notwithstanding that the evidence indicates that Nationwide and Comair were generally regarded as providing a better service to the travel agents and therefore ultimately the consumer."
SAA's legal team said that by March 2004 SAA was technically insolvent and the airline's cash on hand only covered its operational costs for 30-day periods.
"Clearly, any penalty and fine will have disastrous consequences on this cash flow." They suggested that if SAA was able to remain in business after paying the fines it might have to increase its fares to cover the cost.