Air ticket prices are getting cheaper in South Africa – but there’s a catch: CEO
Air tickets are cheaper than they have been previously this year; however, this does not necessarily spell good news for the industry and consumers, says Jonathan Ayache, the CEO of airline startup Lift.
Speaking on the latest episode of Business Talk, Ayache said that air travel demand has not fully recovered in South Africa since the pandemic.
He said that demand is currently around 80% pre-Covid – which is roughly the same as April last year, marking the last 12 months as relatively flat, whereas the rest of the world has recovered beyond the pandemic.
The CEO said that the country’s domestic macroeconomic situation is reducing the number of people who can afford to fly to South Africa. This is despite the consumer perception that more people are travelling.
Supply and demand is a principle which plagues the airline industry, as seen in early 2022, when the liquidation of umbrella company Comair – which operated Kulula.com and was the domestic partner for British Airways in South Africa – wiped out 40% of domestic airline capacity, ramping up ticket prices and forcing other airlines to rapidly boost capacity.
Ayache said that the industry is actually now seeing the opposite – there is now an oversupply with low demand. This is also due to the seasonality of the domestic market, where January, February and March are busier while May, June and July are quieter.
“There’s an oversupply, which seems great for passengers right now because they can get a return trip to Johannesburg for cheap; however, it is not sustainable. You see what happened with Mango (and) Comair – it’s not good for competition,” said the CEO.
He said that airline companies need to grow but also have a duty to act responsibly.
As reported by News24 earlier this week, Ayache believes that dominant airlines are providing tickets below the cost of operating flights and should be investigated by the Competition Commission.
He said that certain airlines have pursued “excessively optimistic and aggressive growth strategies” in the past year; however the gradual rebound of passenger volumes and demand has now created challenges and increased pressure for all domestic airlines.
The impact of this behaviour has been to drive down the pricing of tickets to unsustainably low levels. In the short term, this may seem like a good thing, especially for the public. It’s actually very detrimental in the medium to long term as seen after Comair’s exit, said the CEO.
Looking ahead for the industry, however, Ayache said that he sees opportunity and an upward trajectory for the airline industry once the economy starts to recover and the country ‘gets on top’ of load shedding.
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