Hope for a decline in air fares dismissed

Comair's Erik Venter says with fuel prices rising there is no chance of airfares coming down even if there is more competition. Image: Comair.

Last year‚ an attempt by Safair to start a domestic airline in South Africa was stymied by Comair and Skywise Airline‚ another operator hoping to launch a low-cost airline in South Africa this year. Comair and Skywise got a court interdict preventing Safair from being licensed after they alleged that Safair was foreign-owned and‚ as such‚ was not allowed to operate in South Africa.

Safair's renewed application for a licence is expected to be heard by the Air Services Licensing Council in the next couple of weeks.

"1time provided about 12% of the capacity in the domestic market. Since its demise‚ Kulula and British Airways have grown their capacity by 20% with the introduction of our new Boeing 737-800s‚ Mango has added 33% capacity with two additional 737-800s‚ and SAA (South African Airways) is operating more domestic flights with its wide-body‚ international aircraft‚" Venter said.

He said that this meant there were roughly 15% more seats in the industry since the loss of 1time's 12% capacity. This‚ coupled with a 5% fall in the domestic market‚ meant that the industry now had 8% excess capacity.

"Certainly not a shortage‚ and certainly a very difficult environment for a new airline to start in‚" said Venter.

Good margins, high prices

He said that in the 2013 financial year‚ Comair had made a profit of R46 per passenger‚ a number he described as satisfactory.

"This is good‚ we've had it down to R2 or R3 a passenger. So this is really good‚ this is the best margin we have seen in a long time‚" he said.

Venter said the outlook for the domestic industry was dependent on the outlook for aviation fuel. "Since November it has gone up again by about a rand from about R8/l to R9/l. That is costing us around an extra R20m a month. It has knocked us backwards again," he said.

He said Comair would attempt to increase fares in order to recover some of these costs but was constrained by how SAA and Mango responded.

"Any sane commercial airline would immediately try to recover costs by increasing their fares or fuel surcharge‚ but SAA just doesn't respond," he said

Venter said talk of airfares falling by 20% was nonsense.