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Johannesburg - The joint CE of JSE-listed airline group Comair, Erik Venter, says governments across Africa should not own airlines, as this translates into an anti-competitive market.
"Ultimately, I'd like to see governments across the continent getting out of airline ownership," he said, adding that governments' involvement with national carriers reflected an "almost anti-competitive market".
These state-owned airlines, like South African Airways (SAA) and its low-cost carrier Mango, come in with government backing and take a "big chunk" of market share by offering the lowest prices, he said. Currently, Comair has a 30% market share locally, while SAA and Mango have about 50%.
Venter spoke to Fin24.com following the release of the company's full-year results to end-June 2008, for which Comair showed revenue growth of 21.5% to R2.69bn, and a 34% decrease in operating profits to R112m. Profit for the period declined 43.4% to R61.8m.
Venter said that when state-owned airlines start making losses, government keeps "throwing" money back into their operations, with weaker players suffering as a result.
"Some of them just can't compete with an airline that loses R2bn in two years," he said, referring to SAA.
Local low-cost carrier Nationwide was placed under provisional liquidation in April 2008 after being plagued by cash-flow constraints, a 30% increase in fuel costs between March and April and a decrease in passenger load factors
"Government is throwing money into SAA, and therefore funding a loss-making operation. It just doesn't make sense: the private sector would pay tax to the government anyway and it wouldn't have to worry about spending money when SAA asks for subsidies."
With SAA seeking a further R5.7bn, government should rather take those funds and "build about 100 000 low-cost houses', said Venter.
A big constraints hindering private carriers is that all routes across Africa are reserved for state-owned national carriers: "It would help if open skies came into affect," said Venter.
Hefty fuel bills
International flights - to London for example - are where Comair "makes real losses", as the cost of fuel is about R600 000 to fly to London. Comair spent R1bn on fuel in financial 2008, with the rise in the oil price to new highs adding R380m to the company's fuel bill.
With African governments talking about selling their national carriers as they become burdensome. "This provides a lot of opportunities for Comair and we are talking all over Africa and are involved in some discussions," said Venter.
Governments across the African continent (like Zambia, Uganda and Malawi) were making progressive moves in discussing the privatisation of their national carriers, although none had taken the leap to privatise yet and were only in discussions. "But at least they are talking."
However, news has spread through the market of some possible corporate action - where Comair could end up owning a 49% stake in Malawi's national airline.
"They [Air Malawi stakeholders] jumped the gun with a press announcement - but we are still in the process of negotiations and things are looking positive," he said.
- Fin24.com.