South Africa - Cape Town - 31 January 2020 - A Flysafair plane at Cape Town International Airport. Cape Town International Airport. Flysafair is looking at increasing its dominance in the low-cost domestic airline market as cash-strapped South African Airways (SAA) continued to halt operations in the domestic travel market. Picture: Henk Kruger/African News Agency
(ANA)
South Africa - Cape Town - 31 January 2020 - A Flysafair plane at Cape Town International Airport. Cape Town International Airport. Flysafair is looking at increasing its dominance in the low-cost domestic airline market as cash-strapped South African Airways (SAA) continued to halt operations in the domestic travel market. Picture: Henk Kruger/African News Agency (ANA)

Flysafair looking to increase their dominance as SAA continues to falter

By Siphelele Dludla Time of article published Feb 9, 2020

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JOHANNESBURG - Flysafair  is looking at increasing its dominance in the low-cost domestic airline market as cash-strapped South African Airways (SAA) continued to halt operations in the domestic travel market.

Flysafair, a division of 55-year-old independent aviation group Safair, became the biggest low-cost domestic carrier in December, just after six years of operating.

Flysafair’s Kirby Gordon said the airline was optimistically watching the recent developments though it was too early to tell how the market would be swayed.

Gordon said SAA’s reduction of domestic flights theoretically presented lowfare carriers with an opportunity to expand.

He said Flysafair had increased its market penetration locally to 24 percent, making it the largest domestic airline in the country

He “Their reduction on supply is good for those who are operating in the market. We are the biggest domestic carrier,” Gordon said.

“That said, I don’t believe that it is necessarily going to be of their plans being rolled out. I think what we are likely to see is that Mango is going to pick up a lot of capacity of the domestic market. And the net results are unlikely to change.”

SAA on Thursday announced that it would cease operating its domestic route network including Durban, East London and Port Elizabeth, save for Cape Town on a reduced basis.

The State-owned carrier is on an optimisation drive to conserve cash as it is buckling under  liquidity challenges.  SAA was placed under business rescue after it hit major turbulence in December.

The national carrier, which has not tabled its financial in the past two years, last made a profit in 2011.

Flysafair is looking at increasing its dominance in the low-cost domestic airline market as cash-strapped South African Airways (SAA) continued to halt operations in the domestic travel market. Photo: Supplied


It has received more than R16 billion in 10 years.  In the low cost airline market, SAA operates Mango.

Flysafair said that it had contacted SAA’s business rescue practitioners to convey its interest should any of SAA’s assets be put up for sale.

Air transport economist Joachim Vermooten said it was inevitable that SAA would offload some of its assets to streamline its business to a manageable capacity.

Vermooten said competitors would be eyeing assets like Mango and SAA Technical, which he said was profitable and not constrained by bilateral agreements.

“I think it’s a right-sighted approach [ for SAA to sell assets], but there are still a number of issues and details that still need clarity,” Vermooten said.

However, it is unlikely that SAA would sell a profitable Mango.  SAA said that customers booked on cancelled domestic flights will be re-accommodated on services operated by Mango and that domestic routes operated by Mango will not be affected by the changes.

Gordon said as much as much as market dominance was ideal, Flysafair would not wish to have monopoly of the market as competition was healthy.

“We don’t want to see the market developing some kind of reticence to fly  or losing confidence in aviation. That's not good for any of us," he said.

"It sounds contradictory to say we like having competition, but aviation is such a small market in terms of a number of players. So in order for us to maintain economies of scale, we need healthy participants in the market."

BUSINESS REPORT 

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