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SA has, since the COVID disaster, undoubtedly increased as a popular vacation and business destination and tourism is very much back on track, so ‘’why,’’ many people are asking, ‘’are airfares still so high and don’t look like reducing anytime soon?’’. Corporate bosses are also questioning whether they are getting the best deals when they see some low-cost fares being advertised but they are being offered more expensive ones. Well, there are good reasons and answers for both of these questions so perhaps I should shed some light on this.
Fuel costing issues
Firstly we need to be cognisant that the airline fuel is benchmarked in US$ and our Rand has depreciated significantly since pre-Covid levels. The actual US$ price of fuel has fluctuated significantly over the last few years, given that it is linked to the oil price and geo-political tensions play havoc on that metric. The Due to sustainability demands alternate fuels are being sought, but these will be even more costly as it will take a number of years (some analysts question, if ever) to produce at scale and the research and implementation of such improvements is also an expensive business, particularly for the airlines that are pioneering them.
The Covid hangover
Another reason we are seeing rate increases is simply as a result of increased demand and unfortunately an undersupply of aircraft. Due to the pandemic, for various reasons, the availability of aircraft has been challenged. We must remember that, understandably, during this era a number of (whole fleets in some cases) aircraft had to be grounded. Quite a few airlines let the older aircraft go, and many airlines de-fleeted “middle-aged” aircraft which stood for so long that the cost of reinstating them outweighed the commercial benefit of buying new ones. Airlines decided that there wouldn’t be sufficient time to amortise the cost of the investment on their maintenance, particularly knowing that in a few years, they could get new aircraft.
Other COVID hangovers are that, from an availability standpoint, pre-COVID, we had two Virgin, two BA and one SAA carriers handling long-haul trips. Now we have one Virgin, two BA and no SAA at all. Additionally, airlines are making nothing from a multitude of travellers cashing in all the airmiles they managed to save during the pandemic when they couldn’t travel at all.
Aircraft production issues
The production of new aircraft for airlines wanting to increase fleets has been no picnic either. Boeing and Airbus have struggled to get components delivered and the new Chinese competitor has not yet received official certification from aviation authorities in the majority of the jurisdictions our travellers travel to. Additionally, a larger number of narrow-bodied planes, those used for short to medium hauls, are being manufactured but far fewer than the wider-bodied planes required for long-haul flights. Airlines order slots are full to 2030 and there have already been delays for these new aircraft! In conclusion, due to their increased costs and fewer available aircraft, airlines have had to hike fares – and have tried to balance this by offering “no frills” low-cost ticket options.
The low-cost fare conundrum
As we like to say in South Africa however, sometimes “goedkoop is duurkoop”! (Penny-wise is pound-foolish). TMCs, especially for corporate clients, may not always sell the cheapest fare to them and there is good reasoning behind this. Because every third corporate ticket is exchanged or cancelled due to changes in arrangements it doesn’t suit clients to get the cheapest fare which would be bagless, non-nonrefundable and non-exchangeable. In essence, if you are part of a corporate travel program that only goes for the cheapest fares – you may be throwing every third ticket away! TMCs understand the value of maintaining flexibility but I believe it is also their role to educate and advise corporate clients accordingly.
Understand and advise clients Just as I say to my corporate clients, “Trust us, we know what we’re doing and always have your company’s best interests (and bottom line) at heart”, I also say to my TMCs be sure to always carefully analyse travel partners, their cancellations and their company’s particular travel behaviour – then recommend the relevant and correct fares accordingly. We cannot expect our clients to fully understand why they may be paying more without explaining exactly what the airlines are facing, how things are being structured and why low-cost fares may cost them more. In a time when you can get a business class seat with a non-changeable ticket, no lounge access and no pre-seating at a lower fare, something unheard of in days gone by, we all need to make more informed choices!
LIDIA FOLLI
CHIEF EXECUTIVE OFFICER
