Airlines in South Africa have come under fire from the government over their high flight prices, with calls for an investigation into the matter.
Parliament’s Portfolio Committee on Trade, Industry, and Competition chairperson, Mzwandile Masina, recently criticized what he described as “exorbitant” ticket prices, accusing local airlines of driving up prices to levels unaffordable for most citizens.
This sentiment is largely shared by SA Flyer magazine editor Guy Leitch, who agreed that flights in South Africa are more expensive than they need to be, but that the government is also partly to blame for the predicament.
The cost of air travel
Masina has called for a Competition Commission inquiry into the cost of flights, arguing that airlines are taking advantage of market conditions to drive up prices.
Speaking to MyBroadband, Leight said that Masina was “onto something” with regard to these accusations, explaining that airlines are currently enjoying a moment of imperfect competition due to the Covid-19 pandemic lockdown and South African Airways’ (SAA’s) business rescue.
South Africa’s air-carrying capacity is stretched thin right now owing to the collapse of Kulula, Mango, SA Express, and Comair-operated British Airways flights, leading to fewer seats that the remaining services can charge higher prices for.
While the rand’s weakened performance over the last few years has contributed to higher jet fuel and part expenses for businesses, Leight still believes that companies may be price-gouging their users.
“They’re taking the full opportunity to the shortage to rebuild their balance sheet with excessive profits after the losses incurred during the lockdown,” he said.
While it is unlikely that the airlines are engaging in explicit anti-competitive collusion, the various services are still implicitly matching their prices.
To put things in perspective, the cost of flights along South Africa’s most popular routes used to start at around R1,000 prior to the pandemic but has since shot up to R2,500 on average.
Leitch has also accused the government of playing a role in South Africa’s sky-high ticket costs through its indirect influence in the shutdown of Kulula operator Comair.
Comair was grounded by the South African Civil Aviation Authority (SACAA) in March 2022 – a critical period when companies were trying to make up for pandemic-related shortfalls once travel restrictions were eased.
This decision ultimately led to the shutdown of Comair in June 2022, taking roughly 40% of local seat capacity with it.
The SACAA claimed that it grounded Comair due to safety concerns, but the air carrier used both Lufthansa Technical and SAA Technical for its maintenance, both of which were well regarded within the industry.
The shutdown was therefore considered to be largely unsubstantiated, with allegations that the SACAA did it at the behest of the state to try to hamper one of SAA’s competitors.
“They (the SACAA) were literally spinning out of control and grounding airlines left, right, and centre in the dying days of the SAA,” said Leitch.
Adding to this claim is the fact that the SACAA has often grounded airlines right before a long weekend, making them forfeit all the bookings from people travelling over the profitable period.
Airlines not the only ones at fault
Another aviation expert, Linden Birns, recently spoke on CapeTalk about the matter, claiming that South African airlines operate under difficult conditions that drive up costs.
The question of affordability is largely distorted by South Africa’s economic landscape, considering what the average person here earns compared to other countries.
A domestic ticket here costs around 2.8 weeks’ worth of income, while international flights require 6.5 weeks’ income.
In contrast, citizens in the European Union only need to spend the equivalent of three days’ salary for local flights and less than a weeks’ worth for international trips.
While this appears to indicate that South African prices are way higher than the global average, the reality is that they only earn about R17 per passenger, compared to R116 per passenger in most other countries.
A big reason why South African air carriers only earn about 16% of what global airlines do is the result of government taxes and levies, which can make up around a third of the final ticket price.
This includes excise duties on jet fuel, a flat air passenger tax imposed on all departing domestic passengers, 15% VAT applied to domestic airline tickets and ancillary services, and CO2 taxes.
Birns stressed that government intervention by way of reducing these taxes could make air travel significantly cheaper.
As things currently stand, South Africa’s airlines are in a difficult position where they are simultaneously very expensive by local standards, yet are struggling to make a profit.
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