South Africa's four main domestic carriers must raise fares and cut capacity or face possible closure, the chairman of the Airlines Association of South Africa and chief executive of South African Airlink, Rodger Foster, has warned.
Foster says a fares war that began last November means ticket prices in the country are among the lowest in the world, leaving South African Airways (SAA), BA-Comair, Sun Air and Nationwide struggling for profitability. He adds that the weakness of the rand has compounded the problem, with fuel costs 25% higher than in Europe and interest charges around 16% higher.
"Bearing in mind that an airline's overheads are about 60% dollar-related, it is apparent that fares have to rise," he says. "They are 40% below those of the rest of the world. The industry is in a catch-22 situation; the moment the fares harden, the market will shrink, which means there will have to be rationalisation in capacity."
An upwards adjustment in fares was made in July, with SAA and Sun Air - which has spoken to the flag carrier and Virgin Atlantic about an equity deal - raising tariffs by up to 7.5%. BA-Comair and Nationwide each imposed increases of up to 10%. SAA warns of "another increase before the year-end".
Source: Flight International
