Why is SAA still charging extortionate prices during the World Cup?
A Democratic Alliance (DA) study has revealed that the prices being charged by state-owned airliner South African Airways (SAA), ahead of the 2010 FIFA World Cup quarter final, semi final and final matches, are still between two and three times higher than any other airline in the country.
The study shows that SAA's prices are far off the market equilibrium rate, being charged by commercial airliners in this country. The implication is two-fold: Firstly, consumers will be driven away from South African Airways, 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.
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.
The question is thus quite simply: How is it that SAA manages to stay more or less competitive with other airlines before, but not during, the 2010 FIFA World Cup?