With South Africans complaining that domestic flights are too expensive, IOL Travel asked chief marketing officer for FlySafair Kirby Gordon whether a fixed flight price per province would be a better alternative for travellers.
He shared his insights.
“The fixed price model will not work unless the entire industry is forced to do the same thing. Flight prices will not be standard at the lowest fares that we now know,” he said.
Gordon gave an example.
“Let’s assume that FlySafair decides that we can make a stable profit if we charge R1 000 a seat on a Joburg to Cape Town flight. When the flight is far out, we’ll be selling at R1 000, but maybe another airline will sell at R699. We will sell nothing until their fares rise to R1000 or more. Thereafter, we’ll have an advantage and can only hope that we sell out," he explained.
Gordon said flights do not always sell out.
"There are times when demand is low and you might sell very few, or maybe no seats, especially if your competitor has lower prices than you throughout. So, your 100% full flights offer a moderate profit, but every other flight results in a loss. The company will fold. What’s important to consider is also the margin on airline seats.
“The average cost of a seat between Joburg and Cape Town is about R1 000. The average profit per seat in a great year is about R30, which means that you have to sell 33 ’profitable’ seats to counter one empty seat," he added.
Gordon said the demand-based pricing model is key for airlines.
"We need to fly these assets all the time to make their ownership make sense and to offer reliable connectivity to users. There are times were demand will be low and we’ll make horrible losses. There will be times when demand will be higher and we can make a bit of profit to offset those times so that at the end of the year, when the books are all done, we have a sustainable business that we can keep going with," said Gordon.