Ockie
Resident Lead Bender
NEW entrants to the domestic aviation market have given Comair a turbulent time, with the JSE-listed airline’s annual revenue stagnating and profit dropping 17% due to significantly reduced ticket prices.
Comair’s share price fell as much as 10% to an intraday low of R3.01 on Monday after the British Airways franchisee, which also operates kulula.com, released its financial results for the year ended June.
Its savings from reduced jet fuel prices in the first half were wiped out in the second half by ticket prices falling roughly 15% on average in the SA market to compete with new players.
The price cuts also reversed the revenue growth experienced in the financial first half.
Comair CEO Erik Venter said on some routes, ticket prices did not cover costs and average revenue in the industry had dropped 10%.
"Prices will have to go up or someone will disappear from the market," said Mr Venter. "The losses are not sustainable."
Transport economist and aviation expert Joachim Vermooten said a more competitive market was good as the industry could rely on "competitor factors" to be a natural regulator.
He said new entrants had not significantly increased capacity in the market but Mango had purchased new aircraft and Comair replaced older aircraft with larger aircraft.
"You need a third or fourth competitor to get a measure of instability and trigger price competition," he said.
http://www.bdlive.co.za/business/transport/2015/09/15/competition-crowds-profit-at-comair