Unusually high airfares have hit the domestic market over the past few weeks, with industry experts predicting they will stay elevated as prices are driven back to sustainable levels.
Chris Zweigenthal, Aasa ceo, says airfares over the past year have been very competitive and the airline industry cannot remain sustainable at the consistently low fares seen in the past. “Together with high airline operating costs, the low yields combined with no real passenger growth has led to the lack of profitability of many airlines,” he says.
Various reasons for the soaring prices have been given, including the exit of 1time as a competitor in the market, peak travel periods from November to April, the unstable crude oil price, and the weakening of the rand.
“Fares are slightly higher across the board due to factors beyond the control of any airline,” says Hein Kaiser, Mango’s communication manager. “Airlines pay in US dollars for many of their services and components while fuel represents between 30% and 40% of an airline’s operational cost, fleet dependent. Bear in mind that there is a lag effect of approximately three months between crude oil spot pricing and actual delivery against past trading, further impacting current pricing.”
Rodney James, ceo of Skywise (which plans to launch in the third quarter this year), says fares are definitely higher than they should be, citing high demand and the lack of private competition as reasons. He believes the higher fares will result in fewer people flying. “The market is extremely price sensitive and elastic,” he adds.
Jonathan Gerber, director of TAG, agrees, saying higher fares will certainly make people think twice about whether travel is absolutely necessary. “But often it is unavoidable and has to happen.”
For more on this story refer to TNW May 1.
