‘Too many carriers in SA skies’

LAST week the news
broke that Fly Blue Crane
had entered business
rescue and Mango had
made a R37m loss for the
past financial year. Industry
experts say the state of
these companies and
others that came before
them suggest that SA’s airline
market is oversubscribed.
“The number of
participants, for me, is
clearly far too many. The
amount of capacity is clearly
far too much,” says Rodger
Foster, ceo and md of Airlink.
He says new airlines face
the conundrum of whether
to drop their prices to gain
market share but if there
are not enough passengers
on the route, they cannot
generate enough revenue to
cover their costs.
Erik Venter, ceo of Comair,
says the SA domestic market
is small and has not grown
since 2008. “The entry of
new airlines into the market
therefore inevitably leads to
excess capacity, and
then it is just a matter of
who has the deepest
pockets and lowest operating
cost.” Erik says airlines
can only operate by ensuring
they cover their costs, and
that full aircraft do not
necessarily mean that they
have done so.
FlySafair ceo, Elmar
Conradie, says from the
consumer’s point of view,
there is just the right amount
of seats at the right price.
When one looks at Acsa’s
load factors, passenger
numbers are up, says Elmar.
“It seems like the market is
adjusting to the additional
capacity.” According to Acsa’s
latest aviation barometer
figures for July through to
September, domestic arrivals
and departures increased by
3,8% and 3,7% respectively
compared with the same
period last year.
Despite this, Rodger says
the latest developments
at Mango and Fly Blue
Crane may result in some
airlines reducing capacity
and frequencies, but says
Airlink has no plans to cut its
capacity at this stage.
Erik says airlines often exit
the market without reducing
capacity due to commitments
such as employment and
aircraft lease contracts and
their obligation to carry
passengers who’ve bought
tickets.
Airlink, Comair and FlySafair
all say they are doing their
best to keep costs low to
avoid increasing airfares. “I
think we are at a sustainable
pricing point right now. If it
had to go any lower, I think
that would be a problem,”
says Elmar.
TNW approached Mango
and SAA for comment, but
they had not responded by
time of publication.