(by Bruce Lyons) Six airlines offering internal flights in South Africa have been planning ahead for the World Cup this summer. It seems they have foreseen a couple of ‘problems’. First, some rivals might not have realised this is a once-in-a-lifetime opportunity to raise prices as herds of fans travel from one stadium to the next. Second, it is not clear, even to those executives with this level of foresight, which particular flights will be in most demand. The alleged ‘solution’, now being investigated by the SA CC, was for the airlines to share these thoughts with each other along with a proposed plan of action.
South African Airways has applied for leniency and provided e-mail evidence containing the following suggestions that had been shared by the airlines: “air fares will have to be raised in order to cover various anticipated additional costs”; and “airlines have the option to either not provide any inventory for sale until such time, or price all inventory at peak time rates until such time as they have greater certainty”. In other words, hike prices up and leave them there until it looks like the fans will not be travelling. I can only imagine the airlines getting their IT people in over the weekend to reprogram and coordinate yield management software to exploit the mass migrations of football fans (who are apparently less predictable than wildebeests).
The investigation of this case has only been announced today, so I must be clear that this has the status of an allegation, not a proven cartel. However, if substantiated, it reinforces a number of things we know about cartels: information sharing can provide a powerful signal and focus for collusion; leniency programmes can be effective in uncovering price fixing; a cartel of six firms requires organisation and this often leaves a trail of evidence; and e-mails are a wonderful source of such evidence.