New airline puts industry in a jam
New airline puts industry in a jam
Yet another entrant in overtraded domestic market could send SA aviation into a tailspin, writes Roger Makings
A new airline is set to wing its way into the no-frills, low-fare market dominated by kulula.com amid fears that this could lead to a price war and the demise of at least one existing operator.
New entrant 1Time will compete with the likes of kulula.com on the Johannesburg-Cape Town and Johannesburg-Durban routes.
"But you can rest assured it is going to have an impact on the other airlines, BA/Comair, Nationwide, Sun Air and SAA," said one industry source.
1Time, which will be equipped with leased twin-engined McDonnell Douglas MD82s, was conceived and will be run by some of the best brains in local aviation.
1Time's joint chief executive, Rodney James, said the first of two aircraft will arrive from the US this month and could be operational in time for the peak holiday season in December.
"Although we intend to start small, we have plans to double the fleet size within a year, depending on demand."
The newcomer will start with three return flights a day to Cape Town before expanding to Durban and increasing its Cape Town frequencies.
However, the domestic market is hopelessly overtraded and all the carriers are struggling to survive.
The entrance of another player will make the pie even smaller.
Asked how he expected to succeed in an already saturated market, James said the fares would be the lowest on offer.
"So much so we expect even to draw passengers away from the bus companies travelling to Durban and Cape Town."
He said that aircraft were acquired after September 11 and cost about 30% less than those bought before that date following the downturn in travel demand .
"Also, we plan to incentivise our staff through profit-sharing schemes, which will mean that more work will be done by fewer people."
With two of its major overheads significantly lower than those of its competitors, 1Time would gain the competitive edge, said James.
Another factor in its favour is that within the 1Time group there is a profitable engineering company, Aero Nexus, which will maintain the aircraft .
1Time's entrance into the market - in which it seeks to secure 60% of leisure travel and 40% of business travel - will initiate a price war that could test the resources of some competitors.
Kulula.com executive director Gidon Novick said: "We've been saving travellers more than 40% on fares since our launch and will always offer the lowest fares around."
He said kulula had a very low-cost base, but the one area in which there would never be any compromise was safety.
"If costs are cut beyond a certain point, safety will be compromised," Novick said.
In another reference to the dangers of cost-cutting, Novick warned that, in recent years, several airlines had gone to the wall, leaving passengers stranded.
"We must not forget what happened to passengers who had tickets on Phoenix Air, Intensive, Sun Air and Flight Star."
Nationwide financial director Peter Griffiths said the airline welcomed the competition, but that it would not be drawn into a price war.
"Our weapons are our service and overall value for money. There are no winners in a price war," he said .
Meanwhile, another airline intends starting flights from Johannesburg and Cape Town to Stansted Airport in the UK from next month.
Maiden Air CEO Rob Williamson said an all-economy-class B747 would be used to fly four times a week for two months beginning on December 14.
This will not be good news for local airline Nationwide, which launches its first foray into international travel with a service to Gatwick Airport near London at the end of this month.
"Thereafter, we will cease flights for two months until April, by which time we should be registered as a South African carrier and re-introduce the service using a twin-engined B767," said Williamson.
Thirty percent of Maiden' s bookings so far had come from the UK, following strong support from travel agents there, he said.