A lack of yield management lies at the heart of the failure of the Johannesburg-based international startup Avia Airlines, which entered 'provisional liquidation' after only three months of operations.
Gert De Klerk, Avia's sole shareholder, blames the demise on heavy discounting of up to 15 per cent on all tickets, which boosted load factors over 70 per cent. The carrier, with liabilities of R21 million ($5.8 million), did not have a computerised reservation system.
De Klerk is also unhappy with some 'extravagant' contracts entered into by management and argues South African Airways could have given him more time to meet the monthly R2.9 million lease payment on the carrier's only aircraft, a B747SP. Failure to pay the bill led to the carrier's demise in August, after three months on the Johannesburg-London/Gatwick route. John Hare, SAA's senior general manager finance, says competition is too fierce for an airline to survive on discounted fares. He also points to Avia's poor UK distribution and the lack of hard currency earnings.
Avia's failure has also led Hare to call for tougher licensing standards for international operators. New entrants in the domestic market have to put up financial guarantees, but this is not the case for international carriers. Still, De Klerk claims he put up sureties of R5.5 million.
Meanwhile, eight-month old domestic carrier, Phoenix Airways, has been taken over by a charter company, Atlantic Air. The new owners are planning major changes in Phoenix's scheduling on its network, which covers the trunk routes between Johannesburg, Cape Town, Durban and Port Elizabeth.
Source: Airline Business
