Aspirant budget carrier Santaco Airlines is planning to take
to the skies even though local airlines are in dire straits.
Santaco Airlines is owned by local black taxi owners.
The no-frills airline industry, pioneered by kulula.com a
decade ago, is going through a difficult phase - to the point that some
commentators are arguing that the sector is heading for extinction as a result
of a weak economy, high airport taxes and escalating jet fuel prices.
But Nkululeko Buthelezi, business development officer at
Santaco Airlines, says the budget carrier will launch before the end of the
year even thought there is a risk of oil prices shooting through the roof
because of the Iran-US nuclear standoff.
He said: “We intend to launch before the end of the year,
but right now we are taking a step back and monitoring the market.
“When we launch, we want to ensure that we will run a
Respected aviation expert Linden Birns is adamant that if
local airlines can focus on improving their operational efficiency and do away
with flying old fuel-guzzling aircraft, they have a chance of weathering the
current economic juggernaut.
Jet fuel is now hovering at $137 (R1 050) a barrel and is
nearly 10% more expensive than 12 months ago.
Birns adds that the jump in the price of aviation fuel has
added about $37bn to the fuel bill of airlines around the world.
He says: “In Africa, we pay a premium for jet fuel. We have
some of the world’s biggest producers of oil, such as Angola and Nigeria, yet
jet fuel is very expensive in sub-Saharan Africa.”
Apart from battling ballooning fuel bills, local airlines
have also been hit by rising airport taxes and air control tariffs. Last year,
Airports Company South Africa (Acsa) raised airport tariffs by 70% and may hike
tariffs by a further 8% this year.
The cost pressures have been too much for local carriers
such as Comair, the operator of kulula.com and British Airways; state-owned
South African Airways (SAA) and its budget subsidiary, Mango; SA Express and
low-fare airline 1time - which have all recorded losses. The
airlines have been forced to pass on the costs to passengers by raising ticket
Buthelezi wants the government to intervene to stop Acsa
from further raising airport tariffs.
“The government must intervene and ask Acsa to delay the
increases until the economy turns around.
“If the costs keep on rising, we may be in a situation where
airlines will go out of business,” he says.
Acsa spokesperson Solomon Makgale, however, rejects the view
that airport tariff hikes alone have been a profit killer.
He appears to suggest that bullish airlines oversupplied the
market, expecting a boom after the 2010 Fifa World Cup. But that growth never
arrived because of the weak economy and rising fuel prices.
Makgale says: “Following the hosting of major events such as
the 2010 Fifa World Cup and, more recently, COP17, as well as an anticipated
improved economic climate, local airlines had expected the market to grow and
had made more seats available.
“With this anticipated growth taking longer than expected,
the market has been in a state of oversupply, with demand lagging behind.”
Newcomer Velvet Sky avoided a liquidation attempt by a
whisker two weeks ago after it allegedly failed to pay a R29m outstanding jet
fuel bill to supplier BP Southern Africa.
The budget carrier, which has been flying for 11 months,
still owes its creditors R100m and aviation industry observers say it is a
matter of time before it folds. The airline is still grounded and has yet to
take off despite fighting off BP’s liquidation application in the
Pietermaritzburg High Court in KwaZulu-Natal.
Says Birns: “Velvet Sky is a victim of poor business
planning. They came into the market at a wrong time with a wrong business
“They also chose old aeroplanes that are expensive to fly
and maintain. Their aeroplanes consume 50% or 60% more fuel than modern
aircraft, which are more reliable and fuel efficient.”
He maintains that if Velvet had come into the market six
years ago, when fuel was a lot cheaper and the economy much more buoyant, the
no-frills carrier would be in the same position as 1time.
Airlines have been so battered by rising operating costs
that their cash resources have been severely drained.
SAA has gone back to its shareholder, the government, to ask
for a R6bn cash injection to bolster its balance sheet.
1time is seeking to raise R120m to recapitalise its
operations and acquire newer, fuel-efficient planes.
Blacky Komani, 1time chief executive, expects the market to
remain “tough” going forward as fuel prices are expected stay at high levels.
He says the airline will focus on cutting costs and
improving operational efficiency. “We are looking at our scheduling and we will
terminate routes that are not profitable and focus on those that are
- City Press