Thursday, 23 June 2022 10:09

Economists warns flights costs could go much higher after Comair loss.

Staff Reporter.

The cost of passenger air travel in South Africa has increased by almost 50% over the last 12 months as pent-up demand and the closure of several domestic routes add pressure on the market.

Consumer Price Inflation data published by Statistics South Africa on Wednesday (22 June), shows passenger transport by air increased by 49.5% between May 2021 and May 2022 – one of the single biggest increases recorded by the statistics body over the period.

Economists have warned that the closure of Comair in June is likely to exacerbate the crisis as other operates scramble to meet the shortfall. Comair, which operated domestic British Airways flights and low-cost carrier Kulula, was responsible for 40% of domestic airline capacity. It entered into liquidation after the company was unable to secure the necessary funding to remain a going concern.

On 9 June, the airline's business rescue practitioners said it failed to secure the necessary funding to pull it out of financial straits, and there is no longer any reasonable prospect that the company can be rescued.

At least in the near term, air ticket prices are likely to spike. As seen with the reduced routes being flown by South African Airways, over time, other operators will fill the gap left by Comair. However, over the short term, higher ticket prices will add to domestic inflationary pressures, "said economists at the Bureau for Economic Research (BER).

SA Flyer editor Guy Leitch said that the loss of Comair could lead to ticket price increases of as much as 400%.

He added that airlines operate on a dynamic seat pricing and structure their prices according to the demand – leading to price changes literally minute by minute.

He added that airlines operate on a dynamic seat pricing and structure their prices according to the demand – leading to price changes literally minute by minute.

"So that’s going to force the prices up a huge amount and on top of that, we’ve had enormous price increases because of the fuel price increases, so although there’s going to be a removal of 40% of the supply, the demand is virtually going to drop off while a new equilibrium is established. So it’s going to price a lot of the travellers out of the market."

However, it is not all bad news, especially for existing airlines. Domestic airline Lift said that Comair’s exit from the market has provided it with an opportunity to ramp up its own growth plans.