SA’s competition authority said on Thursday it was monitoring airline ticket prices after Comair suspended operations this week due to a liquidity crunch, sparking fears that the remaining airlines could take advantage of reduced supply and hike fares.
The Competition Commission — a key statutory body mandated to investigate abuse of dominant positions and mergers in order to achieve equity and efficiency in the economy — said it had met with airlines Lyft, FlySafair, Airlink and SAA amid concerns that the move by Comair to halt operations could lead to a spike in airline ticket prices.
“Specifically, the [Competition] Commission sought to prevent any possible price gouging emanating from the supply shock. The commission was encouraged by the positive response of all the airlines in this respect as they acknowledged the need to bring in more capacity in the market and committed not to change their pricing methodologies to exploit the situation,” commission spokesperson Siyabulela Makunga said.
He said, however, all parties acknowledged the challenges posed by the rising fuel prices, which could put pressure on the cost of air travel.
“The commission will monitor the situation,” Makunga said.
Comair, which operates British Airways and Kulula flights in SA and is a major player in the regional market accounting for up to 40% of airline capacity, announced on Tuesday night that it had been forced to halt operations with immediate effect due to a lack of funding.
This left thousands of passengers stranded, costing the airline income at a time when it was hoping to return to stability after tumbling into business rescue — a form of bankruptcy protection — alongside many other airlines amid pandemic-induced travel bans.
The indefinite grounding of its aircraft — coming about two months after Comair’s fleet was grounded for almost a week by the country’s aviation regulator due to safety concerns — risks causing enormous reputational damage to a company that was once the gold standard in the local aviation scene, going more than seven decades without making a loss.
The National Union of Metalworkers of SA [Numsa], one of the major unions at Comair, said on Thursday the company can be saved only if there is a new management team in place.
“As Numsa we have repeatedly called for the immediate resignation of Glenn Orsmond as CEO of the company due to his complete incompetence and lack of vision. Under the poor leadership of Mr Orsmond and the BRPs [business rescue practitioners], the airline has gone from one crisis to another,” Numsa general secretary Irvin Jim said on Thursday, after a meeting with the company’s management.
Numsa, which represents 700 of the 2,000 workers at Comair, said management had failed to answer almost all its questions during Thursday’s meeting, including whether employees would be paid their salaries during the period of the suspension of operations, and the total amount of money Comair needs to restart
operations.
Numsa said while Comair management claims that high fuel prices plus the recent Omicron-related lockdown were responsible for the company’s financial woes, rival airlines are operating in the same environment “and yet Comair is failing to generate revenue to make it sustainable”.
The union said the leadership team was not up to the task of turning the airline around and was clearly “failing where others are succeeding.
“It is clear that the future of the airline remains very uncertain and we remain doubtful that Orsmond can assist us to find a long-lasting resolution,” Jim said.
“We also have questions about the role of the BRPs, which have been in charge for almost two years. They were paid exorbitantly and were seemingly unable to foresee this financial hurdle ... which is only rescuing the practitioners’ personal bank balances by making them richer at our expense.
“Our members have had enough. They are understandably angry. We will demonstrate until Glenn Orsmond marches out of the buildings permanently,” he said.
Responding to questions from Business Day, Orsmond said everyone’s focus should be on restarting operations as soon as possible.
“Everyone’s priority at the moment should be to get our aircraft back in the skies. Our focus needs to be to work together to do that, save jobs and an important South African airline, and as CEO, I’m dedicated to doing that,” Orsmond said.
Comair’s new owners — including former directors Martin Moritz, Pieter van Hoven and Rodney Sacks, and an investment vehicle, Luthier Capital — have been pushing hard for funding since January to make up for about a R100m loss in revenue arising from travel bans in the wake of the discovery of the Omicron variant. But so far, their efforts have not yielded much success.
Under the approved business rescue plan, the new owners agreed to inject R500m into the group in return for virtually all of the company. Additional funding of R1.4bn, comprising R600m in new borrowing and R800m in deferred debt, was due to be secured from banks for this plan to be carried out.
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