Anyone travelling through London Heathrow airport would be forgiven for thinking that international travel was back to normal after the lifting of Covid-19 restrictions.
However, as the continued failure of airlines such as Flybe demonstrates, travel is by no means back to normal yet. The more entrepreneurial players are expanding, either organically or by acquisition and the aviation landscape is destined to look very different in a few years to what it was pre-pandemic. This is happening in SA too, where start-up airline LIFT has recently announced a major expansion of its route network.
In an interview with the Irish Sun, Ryanair boss Michael O’Leary forecast that European carriers will be reduced to just four in number over the next few years — Ryanair, Lufthansa, IAG (holding company of British Airways, Iberia & Aer Lingus among other airlines) and Air France/KLM.
O’Leary reckons budget airlines such as easyJet and Hungarian-domiciled Wizz Air will be gobbled up by the legacy carriers and that state-owned entities such as Italy’s ITA Airways and Portugal’s TAP will be sold. Whoever buys TAP will be getting an interesting route network, especially into Southern Africa (Mozambique and Angola) and South America.
In the US, consolidation of the aviation industry has been the name of the game since its wholesale deregulation in 1978. The market has consolidated to the extent that four airlines — American, United, Southwest and Delta — control 80% of flights in the country.
But it’s an imperfect model, working predominantly from a so-called hub and spoke principle, whereby each airline has its own city that it operates out of. In practical terms, this can make travelling to lesser-known cities difficult and more costly, as the airlines tend to use smaller, regional aircraft with fewer seats for these trips. A couple of airlines, Breeze and Avelo, are challenging the status quo but it takes time and deep pockets to succeed.
With the demise of Comair last June, local aviation went into a tailspin. It couldn’t have happened at a worse time, as international inbound tourism was starting to improve after being in deep-freeze due to the pandemic.
Opinions vary, but it is generally agreed that Comair (kulula.com plus the BA franchise in SA) held 40% of the local aviation market. Removing that in one fell swoop resulted in local ticket prices soaring.
At that time, LIFT operated just one route, between Johannesburg and Cape Town. It has since added another four aircraft to its fleet of Airbuses and has increased its seat capacity by over 300% to more than 1.5-million seats a year.
LIFT hardly registers alongside the big players in the local aviation industry such as FlySafair and Airlink but, thanks to its ability to understand what drives consumer sentiment towards flying, it punches way above its weight.
When travellers are deciding whether to buy an air ticket, cost is a big factor but not always the deciding one. Quality of on-board service, ease of check-in, the ability to change tickets with few if any cancellation penalties are other factors that need to be taken into account.
LIFT has started off well and appears to have survived the pandemic. Perhaps people like the cheeky and irreverent nature of LIFT’s marketing and are prepared to give the underdog a chance when they would normally sidestep such tactics.
It obviously appeals to the younger generation in the same way that kulula.com did. But this is cut-throat business with no room for complacency. If LIFT can maintain its momentum, it will be one of a tiny handful of players that survives and thrives. If not, it will join SAA on the scrapheap of once great airlines.
• Gilmour is an investment analyst.
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