SAA wraps up your cash

2014-02-09 14:00

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The national airline charges you a hidden cost of between R50 and R100 for a baggage wrapping service even if you don’t use it

SAA has been fleecing all customers flying out of OR Tambo airport since November, charging them between R50 and R100 for a bag-wrapping service that did not exist.

Only at the end of last month did the national carrier actually introduce the mandatory plastic wrapping for all luggage, despite internal legal advice saying it shouldn’t, two separate legal threats and internal warnings about raising fares for a service customers may not really want or need.

The price being charged is also decried as “exorbitantly expensive” in correspondence between SAA managers and the airline’s bid adjudication council (BAC), which oversees procurement.

Only one company, Bagport South Africa, was considered for a multimillion-rand, three-month trial of the service.

Bagport is the same company that already provides the independent bag-wrapping services at South African airports, which passengers can choose to use if they want to, under a contract with Airports Company SA (Acsa).

Now the charge is not optional and is built into airfares.

The exact amount seems uncertain. The original business case says the charge should be R50 per bag, R20 of which goes to SAA and R30 to Bagport. But an internal email from SAA’s manager for network planning Keith Green, dated January 3, says SAA has been charging R60 for domestic passengers and R100 for international passengers leaving Joburg since November 1.

Although this is higher than originally mooted, SAA is still paying Bagport R30 a bag, according to a letter to Bagport, dated January 21, finally approving the trial.

The new charge was never announced and is hidden inside the cost of purchasing an SAA ticket.

In an emailed response to questions, SAA defended the trial as an attempt to tackle the “unabated challenges of pilferage and damage to baggage”, as well as something that provides “a convenient and efficient customer experience”.

The three month trial is estimated to cost the national carrier R26?million – assuming it pays R30 each for roughly 288?000 bags a month. The cost to customers will likely be at least R45?million over the three months, possibly much higher.

These figures are contested by insiders, who claim the official business case massively understates passenger volumes out of OR Tambo International Airport.

SAA told City Press the increase in fares in November “supported SAA’s customer service needs”, adding it is “standard industry practice to continually review pricing”.

SAA did not respond to questions around how much is being charged for the wrapping service. Documents also indicate SAA has planned to hide the fact that it has increased fares to pay for the service.

The business case document from October last year raises the concern that the fee would be “visible” if only charged for flights leaving Joburg.

“We may have a problem domestically – from Joburg, the fare will read R550; and from Cape Town to Joburg, it will be R500,” reads the document, which was prepared by SAA’s head of airport operations, Tebogo Tsimane, and the carrier’s customer services manager, Bali Mabane.

It then suggests the increase gets spread to all domestic flights at a rate of R30 – even at airports where there is no baggage wrapping service provided.

On a round trip, SAA would then get R60, it says.

The alternative is to hike all flights by R50 to get R100 on a round trip, it notes.

The minutes of a BAC meeting held on January 24 shows more concern the public will find out SAA has charged them for nothing.

Both Acsa and one its licensed baggage handlers were at that point planning legal action, according to the minutes of the meeting.

“If there could be a legal challenge, it would amount to public record and the fear is that SAA had been charging customers for this service since December 2013 with no award being made, which would be revealed in court documents [which would amount to huge challenges],” read the minutes of the BAC’s discussion.

But SAA says it is not aware of any threat or legal action as a result of the contract. It also denies the BAC moved to retract the contract.

“The proposal received from Bagport SA by SAA was vetted by the BAC, and during these proceedings there was no official submission to retract. The BAC’s recommendations were, however, minuted.”

These minutes read: “It was resolved?...?the BAC retracts its previous approval to confine and award the wrapping services to Bagport and recommend the suspension of the services.”

The same minutes read that there was “an imminent legal challenge by one of the ground handlers and a legal process undertaken by Acsa that indicated they have approached an external attorney to challenge SAA”.

It’s not certain the wrapping will result in less theft. In its own documents punting the service, SAA notes rival airline Emirates introduced mandatory wrapping – but then cancelled it when it resulted in an increase in the theft of whole bags as opposed to “pilfering”.

Other objections to the wrapping of all luggage were raised. At a BAC meeting on January 17, SAA’s sourcing specialist Lee-Anne Swart gave written answers to the BAC’s concerns.

The BAC questioned the R26?million trial “without going out on tender” and asked why SAA couldn’t first survey passengers on whether they want the service. Swart answered the trial is “self-funding” and would actually make SAA money.

The BAC also said the contract “makes no sense at all” because the three-month trial would cost more than an entire year’s claims for pilfered and damaged baggage.

SAA receives claims of up to R18?million a year – mostly related to damage to luggage.

If the Bagport contract stretched over a year, it would cost the national carrier more than R100?million – before the airline adds its margin.

Fast Facts

The battle of the bid

SAA had been trying to give Bagport a multimillion-rand trial contract since October last year.

The original business case for wrapping all SAA baggage, dated October 22, was approved by SAA CEO Monwabisi Kalawe on October 28 last year. That plan would have seen Bagport set up shop on November 1.

After months of wrangling and internal disagreement, the trial rolled out on January 22 with the installation of 27 wrapping machines and 105 Bagport staff at SAA ticket counters at OR Tambo International Airport.

Two days later, the BAC “retracted” its approval of the trial.

Internal legal opinion concurred, saying SAA should wait until a dispute with Acsa is resolved.

SAA management then appointed a new external senior counsel, who gave a different view: the trial got the green light.

This seesaw is detailed in minutes of BAC meetings as well as internal emails and reports.

There has been a to-and-fro between Acsa and SAA for months, with Acsa repeatedly telling SAA to desist from awarding the contract to Bagport.

Acsa claims only its three licensed ground-handling contractors could bid for the service.

SAA has instead explicitly excluded them, in effect excluding Acsa from what seems like a lucrative source of revenue.

Another legal challenge is threatened by one of Acsa’s licensed handlers, Bidvest subsidiary BidAir Services.

BidAir has repeatedly written to SAA, asking why it wasn’t allowed to tender.

SAA has now resolved to put the contract out to tender after the trial, but Kalawe has indicated he still considers Bagport the best choice.

In an email seen by City Press, he says the bidders would probably be the three Acsa licensees, Bagport, as well as a new subsidiary to be created by fellow state-owned airline SA Express (SAX).

Kalawe adds he “has a few concerns” about the Acsa licensees bidding for the work.

According to him, their transformation profiles are not “aggressive” enough and the problem of pilfering and baggage damage is their fault.

Should SAX get government permission to set up its own wrapping service, they “will have to go in the mix somehow”, says Kalawe.

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