THE Competition Commission of South Africa would seek to prevent price gouging from the supply shock as the result of Comair’s suspension of all British Airways (operated by Comair) and kulula.com flights with immediate effect from Tuesday.
The Commission’s spokesperson Siyabulela Makunga said this decision would significantly reduce capacity in the domestic air travel market and reduce competition.
“Concerned about the impact of Comair’s decision on air ticket prices and in order to understand how capacity could be brought to the market to mitigate the impact of the decision, the Commission on Wednesday 1 June, 2022 met separately with the leadership of major airlines, Lyft, FlySafair, Airlink and the South African Airways (SAA),” Makunga said.
The Commission said it was encouraged by the positive response of all the airlines in this respect as they acknowledged the need to bring in more capacity in the market and committed not to change their pricing methodologies to exploit the situation.
It said that all parties further acknowledged the challenges posed by the rising fuel prices which would further put pressure on the cost of air travel.
Meanwhile, the National Union of Metalworkers of South Africa (Numsa) said yesterday it would picket outside Comair premises today in support of its call for the immediate resignation of chief executive Glenn Orsmond and the end of the business rescue process.
Numsa met with Comair’s management yesterday to discuss the fate of the airline after Comair grounded its operations, which account for about 40 percent of all domestic flights, from June 1.
The airline, which operates British Airways and kulula.com, cited a cash-flow crisis as the reason for its financial distress, partly brought on by high fuel prices.
Numsa general secretary Irvin Jim said the meeting with the chief executive yesterday “left us with more questions than answers. Unfortunately, the meeting was very frustrating because the CEO was at times evasive or unwilling to respond directly to certain questions”.
Numsa has some 700 members at the company. Jim said they had asked whether employees would be paid their salaries during the period of the suspension, which management would not confirm.
“We asked how long the suspension of operations would be in place. They could not say because it depends on whether the funding could be raised by the BRPs (business rescue practitioners),” said Jim.
The airline would also not disclose the amount of funds it would require to be financially sustainable because “they say that information is confidential”. The airline would also not provide timelines to raise the funding for the airline.
“Under the poor leadership of Orsmond and the BRPs, the airline has gone from one crisis to another,” said Jim.
The grounding and suspension of the airline has also left thousands of passengers deeply inconvenienced and the management handled the situation very poorly, said Jim.
“We also have questions about the role of the BRPs which have been in charge for almost two years. They were paid exorbitantly and were seemingly unable to foresee this financial hurdle,” he said.
In April, The International Air Transport Association (IATA) said African airlines had a 69.5 percent rise in February RPKs (revenue passenger kilometres) versus a year ago, a large improvement compared to the 20.5 percent year-over-year increase recorded in January 2022 compared to the same month in 2021.
February 2022 capacity was up 34.7 percent and load factor climbed 12.9 percentage points to 63.0 percent.
Pre-Covid, the air transport market in South Africa was forecasted under the “current trends” scenario to grow by 102 percent in the next 20 years.
This would result in 21.4 million additional passenger journeys by 2037. If met, this increased demand would support about $19.1 billion of GDP and almost 797 410 jobs.
In IATA’s State of the Region for Africa & Middle East report released in March, the association said the trade-weighted US dollar index had started 2022 on a soft note after seven consecutive months of growth between June and December 2021. It fell by 0.6 percent in January and moved sideways in February.
The February developments were partly attributed to US economic sanctions on Russia, muted foreign exchange movements in key regional currencies, and rising jet fuel prices amid sanctions on Russian oil and gas.
The jet fuel crack spread was also increasing as some refineries switched from jet fuel to diesel due to the lack of supply of ultra-low sulphur diesel (ULSD) from Russia.
Regarding the passenger market, the report said global air travel started the year on a soft note. It was negatively impacted by the Omicron wave that led to thousands of flight cancellations and weighed on peoples’ willingness to travel.
Industry-wide revenue passenger-kilometres (RPK) fell by 49.6 percent in January 2022 versus January 2019, after a 45.2 percent decline in December 2021 versus December 2019. Month-on-month change was negative at -4.9 percent.
The negative impact of Omicron on air travel was broad-based across all regions. African airlines reported a 58.6 percent RPK decline in January after a 57.9 percent fall in December (both vs the same month in 2019).
For Middle Eastern carriers, the RPK contraction compared with 2019, accelerated from 49.9 percent to 53.9 percent between December and January.
The cancellation of passenger flights due to Omicron disruptions also resulted in a renewed squeeze in belly-hold cargo capacity.
As of March 2022, African airlines were scheduled to receive 29 percent more aircraft deliveries in 2022 compared with 2021 while Middle Eastern carriers were expected to obtain 47 percent more deliveries over the same period.
BUSINESS REPORT ONLINE