South Africa’s low-cost, no-frills airline, kulula.com, wants to cut high Southern African ticket prices by at least 50%, but it is battling to get rights to routes that have restricted flight frequencies and seat capacity.
kulula’s executive director, Gidon Novick, says regional routes are controlled by agreements between countries. These generally only allow one airline carrier, leading to a shortage in capacity and high prices.
This view is supported by a new report, commissioned by the ComMark Trust, which says Southern African states are hampering economic growth and job creation by subsidising and protecting weak, state-owned airlines.
ComMark is an independent trust dedicated to reducing poverty in Southern Africa through identifying regulatory constraints in clothing, tourism and agribusiness. It focuses on these sectors as they offer significant potential for pro-poor growth.
A flight from Johannesburg to Luanda, Angola, is the same price as a flight between Johannesburg and London, more than three times the distance, says the report. “While regu-lation is intended to protect the smaller national airlines, the air service restrictions actually encourage inefficiency, distort the market and deprive the regulating country of tourism and business spend.”
African ministers responsible for civil aviation met in Côte d’Ivoire in 1999 where they adopted the Yamoussoukro Decision. It called for a gradual, Africa-wide transition to complete liberalisation of airlines through multiple carriers and unrestricted frequency and capacity of flights. Yet, six years later, few African countries have implemented the agreement.
The report says that Europe, which fully liberalised its aviation services between 1988 and 1992, saw a 75% increase in scheduled airline routes, an 88% increase in the number of flights, a 100% increase in the number of available seats and a 15% reduction in average ticket price between 1992 and 2000.
“While profits may be reduced [or losses increased] in the short term, reduced fares lead to increased traffic volumes, which can be turned into an overall increase in both revenue and profitability,” says the report.
It says the air transport industry in Africa generates 470 000 jobs and R74,6billion, but if catalytic impacts on other industries are taken into account, as many as 3,1million jobs are created and R366billion in revenue generated.
The report says one million people visited Johannesburg from Africa in 2004 for business or shopping, but only 300 000 travelled by air.
Since the launch in South Africa of low-cost airlines such as kulula four years ago, the domestic air-travel market has grown by more than 50%. Budget carriers charge less than half the price of full-service airlines, which have also had to reduce their prices.
South African Airways corporate communication manager Azure Janneker said: “In support of the ideals of the African Airlines Association, SAA supports the challenge to open skies to allow for greater tourism and trade on the continent, as encompassed in the Yamoussoukro [Decision], which proposes that airlines be allowed to operate in free skies and serve markets where they exist.”
Flight fares
To destinations less than 1 200km from Jo’burg:
- The cost per kilometre is 52c to Windhoek and 65c to Harare. These are relatively unconstrained routes where BA/Comair competes with the national carriers. Comair’s no-frills carrier, kulula.com, has just entered these markets.
- This contrasts with R1,57 a kilometre to Maputo and R2,01 to Gaborone. Both of these are highly constrained routes that only the national airlines of each country are allowed to fly.
To destinations between 2 400km and 2 900km from Jo’burg:
- The cost per kilometre is 52c to Dar es Salaam and 55c to Nairobi. These are relatively unconstrained routes because of a more liberal approach by the governments involved. Although only the national airlines operate the routes at present, competitors can apply to enter these markets.
- This contrasts with R1,21 a kilometre to Luanda, a constrained route that protects SAA and Angolan national airline TAAG from competition.
— Lloyd Gedye