Airfares attracting industry attention
18 Jan 2019 - by
As South Africa comes off the back of a tough financial year in 2018, members of the corporate travel industry and airline space are keeping a close eye on the aviation sector in 2019.
Travel managers and TMCs continue to watch trends in airfares with interest, particularly off the back of a tight 2018. Frank Palapies, COO, Africa & Middle East for Wings Travel, explains that the margins in the corporate travel industry are based largely on cost efficiency, and that last year’s economic slump has led to renewed concerns around the cost of travel.
Marco Ciocchetti, CEO of XL Travel Group Head Office, notes that, in particular, the airfares for travel into Africa continue to be an issue, although he does not see this changing in 2019. Similarly, Marco Cristofoli, CEO of BCD Travel notes: “There are pockets of expansion, most notably in Nigeria, but extra flights are needed across the continent. The combination of rising demand and constrained capacity means regional fares will increase, at least for business-class travel.”
Kirby Gordon, Head of Sales and Distribution at FlySafair, believes the year could bring change in fare structures as the country continues to navigate the fuel price fluctuations as well as the cost of the rand.
Airlines like British Airways are hoping to address this by introducing new discounted fares, like the Basic Economy fare from Johannesburg, Cape Town and Durban to London. This fare does not include seat selection or checked luggage in an effort to help travellers optimise their spend.
Cristofoli is concerned that, despite the demand from business travellers, excessive regulation of the airline industry “will prevent the boom in new routes and additional frequencies needed to accommodate this extra demand”. Speaking generally, Palapies agrees that regulation of the travel industry is not the way to stimulate growth. He told Travel & Meetings Buyer: “As an industry, we need to look at ways of supporting and developing smaller companies, and this will not be achieved through more regulation of the industry, which will only benefit the large, established companies.”
“A struggling economy is better for us as a low-cost carrier, as corporates look to find the cheapest option when booking travel. This was perhaps best illustrated by the nation’s President flying FlySafair twice last year,” says Gordon.
He says he will be keeping a keen eye on the demand for business class in the South African domestic travel sector. However, he suggests that, as the economy recovers, the demand for business-class options could re-develop. In 2018, FlySafair acquired aircraft from SAA, and reconfigured them to their standard one-class configuration. The same was done at Mango. “This removed a number of business-class seats from the market,” explains Gordon. He wonders if this will be addressed in 2019.
For the corporate traveller, a delayed flight could mean the difference between making a meeting on time to close a sale, or not. “We have found, without a doubt, that the customer who is most annoyed by a delayed flight is the business traveller, because their time really is money,” says Gordon.
He believes that airlines in the domestic space will need to address on-time performances this year, in the hope of maintaining a functioning industry. “The industry at large is affected by poor maintenance organisations’ performances,” he says. Although airlines in the country are looking into solutions for the problems around maintenance organisations, this is a slow process. “To get your Air Maintenance Organisation certificates approved by the Civil Aviation Authority is a difficult thing. I expect this to be an ongoing challenge in 2019.”