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Sat Dec 03 02:17:09 SAST 2016

Low cost airline price war to continue

Carin Smith | 2016-01-05 20:02:47.0
"The fuel price is the lowest in years at the moment, but looking at the rand/dollar exchange rate we would be naive not to expect a slight increase in the long run and if our costs go up, we need to recover it," said Gordon. File photo
Image by: AFP Relaxnews ©Blaj Gabriel/Shutterstock.com

The low cost airline market in South Africa is set to remain very competitive in 2016, but consumers could likely expect a slight increase in fares, FlySafair spokesperson Kirby Gordon told Fin24 on Tuesday.

"The low cost airline market in SA has been operating at an over capacity and some operators are making a loss on certain routes, which is not sustainable in the long run," said Gordon.

He pointed out that 40% of the operating costs of a flight is based on fuel.

"The fuel price is the lowest in years at the moment, but looking at the rand/dollar exchange rate we would be naive not to expect a slight increase in the long run and if our costs go up, we need to recover it," said Gordon.

He emphasised that Flysafair's business model will remain low cost and the aim to keep costs as low as possible in order to pass that on to the fares charged.

"The fundamental is to be quite clear about the difference between a low cost airline and a low fare airline. Low costs enable low fares. From an industry perspective the cost structure is very important. You have to fly the right utilisation of the right kind of economic aircraft with the right passenger format," explained Gordon.

"In the very competitive environment towards the end of 2015 one had to have those elements in place and we believe this will be our key to sustainable success and to keeping fares low."

As for passenger trends during the festive season, Gordon said it seemed many people waited until much closer to the time of travel to book.

The median booking horizon was about 20 days later compared to the previous summer season. Most people booked in November and December where they used to start already in October in the past.

"I wonder whether people did not perhaps become more complacent about the pricing available due to the lower airfares and, therefore, not having to book early to get a good fare," said Gordon.

"We would say it is still better to book flights earlier rather than later in general. Our passengers who booked early could fly from Johannesburg to Cape Town for R499 one way.

An interesting trend for Gordon is what appears to be an increase in domestic tourism as Airports Company SA (Acsa) reported a 14.83% increase in passengers using regional airports during the festive season compared to the previous season.

These include the airports in George, East London, Port Elizabeth, Bloemfontein, Upington and Kimberley.

Flysafair experienced the Johannesburg to Cape Town and Johannesburg to George routes to be very busy and had to increase its capacity over the season.

Another trend was busy routes between Cape Town and Port Elizabeth and Cape Town and East London.

A survey conducted by Flysafair showed that about 15% of passengers said it was the first time they flew, while 60% said they were going to visit family.

He said this could be due to the introduction in the market of lower air fares on certain routes like East London.

Source Fin 24

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