Truth about expensive flight prices in South Africa

Prominent aviation expert Guy Leitch agrees with parliament’s trade committee chair, Mzwandile Masina, that South Africa’s flight ticket prices are far more expensive than they need to be and require investigation.

However, the SA Flyer magazine editor has also pointed out that government actions played some part in the current flights pricing predicament.

Leith’s feedback came in response to questions from MyBroadband regarding Masina’s comments calling for a Competition Commission inquiry into the prices of flights in South Africa.

“Their costs are exorbitant and not affordable for our people,” Masina said.

“We will need to do a market inquiry in this regard and ensure that our people can move from province to province.”

Leitch said that Masina was “onto something” with his accusations about excessive flight prices.

“The airlines are enjoying a moment of imperfect competition due to the Covid-19 pandemic lockdown and South African Airlines’ (SAA’s) business rescue.

He explained that the losses of Kulula, Mango, SA Express, and Comair-operated British Airways flights had resulted in a real shortage of seats, giving the surviving airlines wiggle room to justify higher prices.

Leitch said although a weakened rand has also contributed to higher jet fuel and parts costs, he believed the airlines may be gouging prices.

“They’re taking the full opportunity to the shortage to rebuild their balance sheet with excessive profits after the losses incurred during the lockdown,” Leitch said.

He said that although he did not believe there was any explicit anti-competitive collusion, the airlines were implicitly matching their prices.

“Although dynamic pricing is supposed to be efficient, it is not if the opposition is keeping a close eye on you and you know from what price you could start selling,” he said.

Leitch said that airlines had previously started their ticket prices on the most popular routes at around R1,000 before the pandemic, the starting prices had jumped to about R2,500.

SAA is a participant — not a victim

However, Leitch disagreed strongly with Masina that the airlines’ alleged overpricing was to the detriment of SAA.

He said that SAA was never a budget airline and did not compete with players like Airlink, FlySafair, and Lift.

The SAA Group previously competed in this segment through Mango, which was arguably one of its most successful arms.

However, the company offloaded Mango as part of its business rescue process.

It also scuppered Mango’s chances of a comeback under private ownership by delaying the transfer of critical bailout funding that SAA received while Mango was still in its fold.

Late public enterprises minister Pravin Gordhan also contributed to Mango’s delayed business rescue by failing to decide whether to approve or refuse the choice of a private buyer.

“It was a great pity that they closed Mango down,” Leitch said. “The airline was probably fundamentally profitable.”

In fact, Leitch said that if the prices charged by the competing airlines were too expensive, it presented an opportunity for SAA to undercut them and grab some of their customers.

Instead, the reality was that all the airlines — including SAA — were “having a fine feast.”

Government should look closer to home

Leitch also accused the government of playing a part in the exorbitant flight price environment through its indirect influence in the shutdown of Kulula operator Comair.

Comair’s grounding by the South African Civil Aviation Authority (CAA) in March 2022 occurred during a critical period in which airlines had to make up for their pandemic-induced losses.

The additional financial burden proved too much for Comair, which ceased all operations in June 2022, taking roughly 40% of flight seat capacity down with it.

Leitch expressed serious doubt over the validity of the SACAA’s claims that the grounding was due to flight safety concerns, given its dubious reputation for unsubstantiated interventions.

He emphasised that Comair had been using Lufthansa Technical and SAA Technical for its aircraft maintenance at that stage. Both were highly regarded for their exemplary standards.

Leitch agreed with former Comair CEO Glenn Orsmond that the grounding because of SACAA’s active campaign against the company.

“The SACAA now has a very unfortunate reputation of acting at the behest of the state and trying to damage competitors to SAA,” Leitch said.

“They were literally spinning out of control and grounding airlines left, right, and centre in the dying days of the SAA.”

“A clear indication that this was politically motivated was that they would do these groundings on the day before the long weekend.”

“The affected airline would lose all its bookings over the long weekend, where it had the ability to get really good income.”

“It was an absolute malicious attack by the SACAA on SAA’s competitors and completely out of order, if I’m to be polite about it.”