Cape Town - I am normally happy to receive news of an established airline reducing prices but an announcement that SA Express is launching three new services next week in competition with Airlink – whose fares it will undercut – is worrying, since it appears to be a disguised price war.
One of the new services is between Cape Town and George; the others between Johannesburg and Nelspruit and Johannesburg and Pietermaritzburg. What makes this move extraordinary – and worrying – is that Airlink, which is privately owned, is a franchise holder of SAA. It has for years operated as a “feeder” for the national carrier, flying routes which would be uneconomical for SAA’s larger aircraft.
SA Express is state-owned but not by SAA. However, it operates as part of the SAA group. This makes it extraordinary that it should compete with a fellow member, particularly on price, since it has millions of rands worth of debt which has made the national carrier refuse to take it over.
In the past, Airlink has built up routes to the extent that demand has risen sufficiently to make it worthwhile for SA Express to take them over, and Airlink has then moved on to others to repeat the process.
It has also started routes of its own, including some to neighbouring countries, which mainly attract business passengers.
But on this occasion Airlink chief executive Rodger Foster appeared to be unprepared for this move and is indignant about it.
It is hard to understand why the heavily indebted SA Express, which told the parliamentary committee on public enterprises this week that a R539-million government loan guarantee is due to expire in February 2015 and is ordering a new fleet, should be competing with Airlink by offering lower fares on three new routes all at once.
When SA Express appointed a new board last year, Malusi Gigaba, the Minister of Public Enterprises, made it clear that he would prefer not to have any competition for the state-owned airlines in South Africa, and particularly objected to Airlink, a privately owned company, operating as part of the SAA group.
Hopefully, the fact that SA Express is undercutting Airlink on three of its routes is not a move towards a goal of eradicating any competition for the SAA group in the domestic market, which would definitely not be in the interests of consumers.
SA Express was started by the Thebe Investments group as South Africa’s first black-owned airline, and a Canadian airline company seconded executives to run it. It built up mounting debts and was eventually taken over by the department of transport.
Its commercial manager, Brian van Wyk, claimed it was not aiming to start a price war but believed that by “offering competitive fares we will stimulate demand and make these routes even more affordable”.
Catering for a completely different, international, market Turkish Airlines, which flies to Cape Town all year round, offers a large variety of international destinations through connecting flights from its home airport of Istanbul. The newest is Kathmandu, capital of Nepal, to which it is offering four round-trips a week from November 28.
Turkish Airlines is a member of the Star Alliance of international airlines, to which SAA also belongs, and is a four-star airline. It flies to 197 international destinations. Istanbul itself is a popular destination for South Africans. - Weekend Argus