Being on time supports FlySafair profits - CEO | Fin24

Being on time supports FlySafair profits - CEO

Jan 24 2017 18:00
Carin Smith

Johannesburg - Low-cost carrier FlySafair announced on Tuesday that it made a profit in 2016 - the carrier’s second year of operations.

"We are very pleased with the results," Conradie told Fin24 on Tuesday.

"We always knew it would be tough breaking into this market, but that is basically your investment to establish yourself in the market. We are happy with where we are after two years. We went from two aircraft to nine aircraft and each time you add an aircraft or a new route there are investment costs."

He said the big things FlySafair focused on over the past two years has been on-time performance and customer service.

The profit came despite a tough trading environment, with low economic growth and an over-supply of seats on domestic routes. The profit also came despite FlySafair’s aggressive expansion in 2016. It added three new aircraft to its operating fleet, bringing it to a total of nine aircraft. In August, the airline also launched new routes from Lanseria to Cape Town and George.

Conradie said FlySafair also managed to make a profit due to the fact that, now, more than ever, it’s essential that carriers focus on keeping their cost per seat as low as possible.

"The market is still very tough, but all three low-cost airlines have something going for them. We, for instance, have an existing business and are not just reliant on the low-cost airline. We also have our legacy business to rely on. The big thing is scale. You cannot be small," explained Conradie.

"The market is tough as there is an oversupply and, therefore, not a lot of profit to be made. So, the fact that we do make a profit shows the future looks bright. It’s essential that we drive efficiencies across all aspects of our business in order to remain competitive."

The market is heavily traded at the moment with an excess supply of seats on domestic routes. Fares are determined by a market and are very much at the mercy of the powers of supply and demand. If supply grows more than demand, prices will fall.

Conradie added that FlySafair is looking at 2017 to be a year of consolidation. He said, although the airline wants to continue expanding in 2017, it will not be at the same pace as the first two years.

"We have grown as much as we can grow at the speed we can grow. We will still maybe add a new route or two, but not at the same pace as in the first two years. We are looking at a few possible options, mostly still domestic," said Conradie.

“We’re looking at a few possible expansion plans, but the aim for this year is to slow the growth a little and work on making small differences that will improve our cost efficiencies in order to keep fares as low as possible."

READ: FlySafair CEO: Buying Mango will keep prices low

He emphasised that price and great service play major roles too and pointed out that each Acsa Airport FlySafair operates from honoured the airline with its annual Feather Award for Best Low Cost Carrier.  

“By the end of 2016, we’d flown more than 2.6 million passengers and maintained an on-time performance record of 95.8%, the best in South Africa,” said Conradie.

Statistics published by Airports Company South Africa (Acsa) indicate that domestic passenger numbers grew by approximately 6% year-on-year in 2016, but was outstripped by the supply of seats, which is said to have grown by as much as 12%.

FlySafair pointed out that 2016 proved to be a tough year for local airlines, with SAA’s low-cost carrier, Mango, posting a loss of R39m, while SAA secured an additional state loan guarantee of R5bn. Comair, operators of low-cost carrier Kulula, reported a 10% increase in passenger numbers, but a 12% decline in profits after taxation.

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