SAA grilled on kickbacks

Pretoria - Former South African Airways (SAA) CEO Andre Viljoen was "not 100% sure" if financial incentives his company paid to travel agents worked.

Viljoen was responding to questions in a Competition Tribunal hearing that resumed earlier this week and which is investigating whether SAA's incentivising of travel agents had been anti-competitive to its peer group, Comair and the now defunct NationWide Airways.

Should the tribunal find in favour of the plaintiffs, Comair, and Nationwide, which is being represented by its liquidators, a civil claim could be lodged against SAA in the High Court.

"I'm not really sure how much they [the incentives] worked in directing business away from SAA competitors," Viljoen told the Competition Tribunal. Many travel agencies operated independently of management and made their own decisions in individual offices without necessarily implementing agreements "reached at the top", he said.

Viljoen cited the example of the travel agency Rennies Travel, saying that with the company's 1 800 employees in 300 different offices around the world it would be difficult to enforce decisions the airline entered into with its chief executive.

"I don't see how that filters right down to the bottom to (individual) agents in the offices," said Viljoen. "People go in there and get pretty much what they like."

Viljoen was on his last day under cross-examination by Anthony Gotz, counsel for the liquidators of Nationwide Airlines, a day after having been cross-examined by David Unterlhalter for Comair.

SAA reached a settlement in 2006 with the Competition Commission and paid a total fine of R100m fine without admitting liability for anti-competitive behaviour between 1999 and 2004.

Safety scares

After questioning Viljoen on SAA's service and safety track record during the time SAA was offering agencies incentivisations, Gotz asked why SAA didn't lose any market share to its competitors, even after suffering two safety scares in 2001. The understanding is that passengers prefer other carriers when an airline suffers a safety scare or accident.

Viljoen refused to attribute the passenger loyalty to the incentive scheme with travel agents, saying instead he believed the flying public knows the media exaggerates whenever there's a whiff of compromised safety in air travel.

"If an incident occurs at BA (British Airways), it gets flogged by the media and when Virgin Airlines lands with wheels up the pilot is called a hero," responded Viljoen. "All national carriers get flogged."

Last week former Nationwide CEO, Vernon Bricknell, told Business Report that immediately after SAA announced in 2001 that it had scrapped the incentive payments to travel agents, his company's market share increased by 60%.

Gotz also sought to prove Viljoen's lack of credibility as a witness. He pointed to a few irregularities in SAA's financial results for the year 2002, which Viljoen presided over, and pointed out incorrect information about SAA's fleet of aircraft which he said could have misled SAA's shareholders.

Gotz also questioned Viljoen at length about SAA's alliance with regional airline operators Airlink and SA Express Airways, which in many routes all utilise SAA's infrastructure and booking system.

Fin24.com is attending the tribunal hearing today. Check back for more potential updates.

- Fin24.com