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FlySafair: We are not for sale to Comair

Apr 13 2016 12:38
Carin Smith

Cape Town - Amidst continued speculation in the SA aviation industry about the Comair acquisition deal underway, low-cost airline FlySafair has vehemently denied that it is for sale.

Kirby Gordon, FlySafair's vice president of sales and distribution, told Fin24 on Wednesday that, although the Comair announcement sounds very exciting, he can emphatically state that such a deal does not involve FlySafair.

"There has been a lot of speculation about whether it might be us involved in the deal and we just wanted to clear that up. We are unequivocally not for sale at this stage. In fact, we’re looking to buy in order to expand," Gordon told Fin24.

He added that having a listed entity like Comair recognise the business case for investment in the local industry is, however, an excellent sign.

Comair operates as a British Airways franchisee and also as a low-cost carrier under its own kulula.com brand. It alerted investors this week about an acquisition that it is presently negotiating and which would have a significant impact on its structure.

Speculation is rife about what the Comair acquisition involves. One of the rumours doing the rounds is that the deal could be involving a large independent regional airline in southern Africa.

Gordon also pointed out that in Budget 2016 Finance Minister Pravin Gordhan announced government’s intention to sell off a minority share in a combined entity of South African Airways and SA Express.

Following the minister’s speech, FlySafair issued a letter to the ministry stating that it had no particular interest in investing in the SAA/SA Express entity, but would gladly purchase low-cost carrier, Mango, if the government was interested in such a deal.

According to Gordon, industry experts say it’s unlikely that the Comair deal would involve the other two major low-cost carriers in SA - namely FlySafair and Mango - as a deal of that nature would probably need to be cleared by the Competition Commission and result in the names of the parties being published.
 
Gordon further pointed out that Comair has recently indicated a strategic intent to invest more deeply into the travel vertical, so the acquisition could be anything from a technical division, a ground-handling company or even another airport lounge.

The majority of the speculation has focused on the possibility that Comair will acquire another airline. “If this is the case, it could have different outcomes for the flying consumer depending on the nature of the investment and the operating intent,” explained Gordon.
 
“If the acquisition were of a smaller domestic airline that flies to the likes of Bloemfontein, Pietermaritzburg, Polokwane, and Plettenberg Bay, South Africans may well find increased competition on these routes and even better pricing,” he said. He cautioned, however, that if the acquisition were to result in a constricted supply of seats, the opposite could happen.

“Regardless of what the acquisition is, this investment signifies good things for the domestic aviation and tourism space,” said Gordon. He explained that domestic aviation in SA has been experiencing a significant growth spurt over the past 18 months. FlySafair’s introduction of low fares has decreased fares on some routes by up to 39%, resulting in an overall growth rate of about 9%, according to industry analysts.

"The low-cost airline industry in SA is very competitive and this remains great for the consumer. We have kept our base fares down, but it looks like where the market is at, it would be fair to expect prices to increase across the board in the industry," said Gordon.

"Predictions range from 6% to 9% higher for the industry as a whole and I reckon that is a fair assumption."

He added that March was a phenomenal month for FlySafair and the airline industry in SA in general. In his view, this could have been due to three factors, namely all the holidays which fell in March this year, an increase in foreign tourists due to the weak rand (and they take domestic flights as well) and more South Africans travelling domestically instead of internationally due to the current economic climate.

"I think the combination of these three factors is good for the airline industry in SA," said Gordon.

Airports Company SA (Acsa) numbers for the festive period indicate significant growth numbers, particularly in the coastal regions, with the number of passengers passing through the George Airport, for example, having increased by approximately 40% year-on-year.

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