COMAIR, the company who pioneered low-fare flying in South Africa, says the traditional low-cost-carrier model does not work in Africa and predicts no-frills-carrier fares are likely to equal those of full service airlines in future.
Comair joint chief executive, Erik Venter, said the reason for this is that there is little difference in the operating costs of a low-cost and a full-service airline in this market. “The traditional low cost carrier model does not work here,” he told the Aviation Outlook Africa 2010 conference in Cape Town on August 18.
He said unlike their overseas counterparts that fly to cheaper alternative airports, SA low-cost-carriers (LCCs) are subject to the same taxes and airport landing fees as full-service airlines.
Erik added that the only real difference between the two airline business models is the low fares offered by LCCs, but this depends on high volumes, which in turn are difficult to achieve in Africa, particularly on regional routes. He said pressure to offer lower prices means LCCs have to use increasingly larger aircraft to achieve higher volumes of traffic. Comair is in the process of upgrading its fleet. It has acquired two new generation B737-800 aircraft, which are flying in kulula.com livery. It plans to acquire a further eight new B737-800’s for delivery over the period 2012 to 2015.
Erik predicted that a recovering world stock market and resulting climbing oil prices would severely impact on LCCs in future. A predicted shortfall of pilots in Africa would also add to airlines’ costs. All this would contribute to the LCC market in South Africa reaching saturation point. “We’re sitting at a plateau of low cost carrier growth in South Africa. [Past] growth is hardly going to be maintained and low cost carrier tickets will go up and probably not be far off from full service airline tickets in future,” he said. “And if we can’t keep prices at a low level, we won’t get the volumes and then we can’t maintain the LCC model.”
For more on this story refer to TNW September 1.
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