After Comair, how will the South African aviation industry fare?

Price hikes and low seat capacity will probably be the hallmark of Comair’s exodus from the South African aviation industry, which was in serious trouble before the Covid-19 pandemic disrupted air travel around the world.

But Comair’s demise creates an opportunity for international airlines to enter the domestic market.

Comair, which had operated for 76 years, was placed under provisional liquidation by the high court on Tuesday and will now start the process of winding down its operations.  

The effect on the local industry could be dire, because Comair supplied about 40% of the domestic seat capacity. 

In addition, low-cost airline Mango is in business rescue and the national carrier, SAA, had to reduce its capacity for it to be operational when it started flying again in 2021 after being grounded for 18 months.  

According to aviation expert Desmond Latham, there is a possibility of international airlines coming in to plug the gap left by Comair, with leading contenders being Qatar Airways and Emirates.

“Qatar and Emirates have been aggressively pursuing routes in Africa against each other. They are trying to basically recolonise airspace for their own gain,” Latham said.

In its annual report for 2021, Qatar Airways said it had added new destinations in Africa, including Abuja, Accra and Luanda. 

In its report, Emirates said it had entered into agreements with partners FlySafair and Airlink in South Africa to expand connectivity for its customers. 

Under its interline agreement with Airlink, Emirates will provide customers with enhanced connectivity from its gateways in Johannesburg and Cape Town to more than 25 new domestic destinations in South Africa and 20 destinations in Southern Africa. 

The interline agreement with FlySafair will see Emirates extending its reach to domestic points operated by the carrier.

An interline agreement is one in which two or more carriers co-ordinate the transportation of passengers and their baggage from the flight of one air carrier to that of another.

Comair operated British Airways (BA) in South Africa as a franchise partner from 1996. With Comair grounded, so too is the British Airways fleet — but not for long. 

Latham said: “British Airways has had a historic relationship in South Africa and I don’t think they are going away because some of our biggest numbers of tourism come from the United Kingdom.” 

He added that British Airways will probably have an agreement with one of the domestic airlines and, in the medium to long term, will return to numbers seen before the pandemic. 

“By the end of next year, we should see it going back, so BA is pretty secured,” Latham said. 

South Africa’s aviation legislation does not permit foreign airlines to pick up and drop off passengers on domestic flights in the country, according to the Airlines Association of Southern Africa. Foreign airline companies wanting to operate in South Africa can enter into commercial agreements, including code-sharing arrangements, with local airlines. 

Dwindling capacity

The country still has an airline capacity problem, which the remaining airlines cannot plug without either carrying additional costs or raising prices. 

Comair owns 10 Boeing 737-800s and three Boeing 737-400s. Comair also leased 13 Boeing 737-800s. The 400s have a seating capacity of 165 passengers per aircraft, and the 800s a seating capacity of 189 passengers. 

“We’re talking about thousands of passengers a day. If those planes are out of circulation, no one can pick that up in the short term,” Latham said. 

“To attempt to solve the capacity problem, many airlines will lease from the likes of Wells Fargo. Right now airlines are signing leases to get capacity, so, in the next few weeks we are going to suffer quite a bit as airlines hike prices.” 

He said that by the third quarter of 2022 the number of aircraft will increase but so too will demand as South Africa approaches the spring/summer season

“Capacity is not going to go back to what it was in 2019 at least until 2024. In the short term capacity is constrained and prices will be high,” said Latham.

Capable flag carrier 

South Africa’s lack of a capable national airline has fuelled uncertainty in the industry, Latham said.

“In SADC [Southern African Development Community] we need airlines. Our infrastructure is not at the place where we can drive back and forth or take the railway and because of that, it is important for national airlines to be sustainable.”  

SAA was grounded for a year and a half after it became the first state-owned entity to be placed under business rescue — in December 2019. In April 2021, it exited business rescue with R500-million for its working capital requirements.

At its relaunch in September, SAA first plied the Johannesburg to Cape Town route before starting to operate flights to other African capitals. Only in March this year did it revive its Durban route. 

Mango, the national carrier’s low-cost airline, also went into voluntary business rescue last July and has not operated flights since.

Latham stressed the key role of national airlines was not only for geopolitical strategy but also as a show of the country’s capability. He noted how Lufthansa, the German flag carrier, was privatised in 1997 but is still supported by the government.  

“The government of Germany regards that airline as an important strategic asset. Ethiopian Airlines is government owned and the government does not interfere,” he said. 

According to the Ethiopian Airlines website, “Government oversight is retained much in the same way as SAA through political appointments to the board of directors … However, the Ethiopian government, in their capacity as owners, and the board of directors, in their capacity as representatives of the owners, prioritised hiring professional management staff on merit rather than political placements motivated by patronage and cronyism.”

Latham said: “We need a capable national airline for the spirit of the nation and part of that is the picture of the tail when an aeroplane lands in JFK and you see the South African flag. It is a very important notice to the world in terms of development. There is a place for the government in aviation but they must not run it, they must only invest in it.”  

Domestic aviation strained

The domestic industry has come under strain for some time, with the cost of running airlines rising by 40% over the past 18 months, hitting operators that were already struggling such as SAA and Comair.

Added to this is the cost of jet fuel, which has soared to $176.6 a barrel, a jump of more than 128% from a year ago, according to the jet fuel price monitor. 

The second source of instability is the sudden and growing demand for experienced, skilled air crew. There is a global shortage of pilots and airline crew since the Covid-19 outbreak because pilot hiring was stopped as training and licensing slowed. Airlines handed out early retirement packages to thousands of pilots and other employees, according to CNBC. 

“It takes about eight years before you even get into an aeroplane at the front to fly professionally as a certified pilot. It’s similar  to being a chartered accountant or a senior surgeon and just like the rest of the world South Africa is also facing a crisis. Moreover, our pilots are leaving for Qantas or an airline in the Middle East,” Latham said.  

In addition, state-owned entities such as Airports Companies South Africa, which runs traffic control, have put up the taxes and tariffs over the last five years. 

“Landing fees for each time a wheel hits the runway at OR Tambo are paid in dollars and that is one of the things local operators have complained about,” Latham said. 

“Comair’s departure has led to a rise in local ticket prices by at least between 35% and 40%. For the aviation business Comair’s departure is a good thing because you want demand to be high so you can charge more, but there is a limit to how much people are prepared to pay for tickets and we’re at that limit now.”

Anathi Madubela is an Adamela Trust business reporter at the M&G.

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