Airline travellers, who had to pay more for domestic airline tickets in the scramble to find alternative flights after Comair was grounded, will have to brace themselves for generally higher prices this year.
Not only are inflationary pressures expected to affect input costs for most airlines, which traditionally operate on paper-thin profit margins, but aviation analysts say rocketing jet fuel prices make ticket price rises inevitable.
The spotlight was placed on pricing early in the week by the Competition Commission after Comair, which handles about 40% of domestic travel capacity, had its air operator certificate suspended for five days from Saturday over safety concerns.
The commission said there were “reports and complaints of large increases in price for seats on the remaining airlines, some even quoting R5,000 [for a] single flight ticket from Johannesburg to Cape Town”.
It warned it would be “engaging” with airlines and would “not hesitate to act swiftly and decisively” if it found evidence of price gouging.
But aviation analysts and airline executives say there has not been any price gouging, arguing that the high ticket prices that some passengers had to pay were already in the airlines’ ticketing systems and had kicked in automatically as soon as demand ate up the existing supply of more affordable tickets.
Jet fuel doubled in price over the past year and has gone up by another 50% in the past month ... And there hasn’t been much fare adjustment since then
— Linden Birns, aviation analyst
They also argue that generally ticket prices are too low to be sustainable over the medium to long term, especially with fuel prices surging as a result of the fallout from Russia’s war in Ukraine.
Airlines traditionally offer a range of pricing for seats for all their flights, with buckets of lower price points acting as loss-leaders to attract customers, with offers of one-way tickets to Durban, for example, of as low as R430-R500.
There is a graduating scale, with one-way flights progressively becoming more expensive to R3,000 and beyond depending on whether they are premium- or business-class seats and how far in advance they are booked. The sliding scale is aimed at covering the costs of flights as well as achieving some margin on them.
Aviation analyst Linden Birns of consultancy Plane Talking said customers “didn’t all of a sudden experience price increases” this week.
“All that happened was they went to the showroom and the Polo Vivos were sold out and the only cars left were Jettas and Golf GTIs. It wasn’t that the prices went up. Those prices were already in the system.”
Aviation economist Joachim Vermooten said: “If you take 40% capacity [covered by Comair] out of the market, demand exceeds supply and before there is any human intervention, these systems take over and you find yourself in a high-price situation. I don’t think there is price gouging by the airlines.”
But Birns and Vermooten still expect general ticket prices to increase this year.
Birns said general ticket prices “are currently not sustainable … purely because of the jet fuel price”, which is internationally set and imported by SA.
“Jet fuel doubled in price over the past year and has gone up by another 50% in the past month [as a result of the Ukraine war]. And there hasn’t been much fare adjustment since then. The input costs of airlines, especially on fuel, have just spiked and fares are going to have to go up,” he said.
He said it was impossible to estimate how much ticket prices could increase by, primarily because of the volatility of the oil price and because pricing was dependent on each airline’s cost structures.
Birns said there would still be affordable flights, or loss-leaders, as well as more expensive ones, but these were a “moving target”.
Rodger Foster, CEO of Airlink, said the airline “ has not adjusted its fares since November, which was to cover the 100% increase in the price of jet fuel last year”.
There was a wide range of price ranges on flights to Cape Town and Durban by Comair, when it resumed flying on Thursday.
On Thursday, price ranges for Friday flights to Cape Town were from about R3,300-R4,900. Durban prices for Friday ranged from about R2,500-R3,600.
Asked about the prospects for rising airfares, Comair CEO Glenn Orsmond said: “Increasing fuel prices and generally upward inflationary pressure will affect airfares.”
Miles van der Molen, CEO of private airline CemAir, also believes ticket price rises are inevitable over the medium term as they are generally too low.
The input costs of airlines, especially on fuel, have just spiked and fares are going to have to go up
— Linden Birns
He said he did not believe there had been price gouging.
“From what I’ve seen, a lot of fares went to the R3,500 price region and there is a thick band there. One or two broke through that, so I wouldn’t say R3,000 is overly expensive at R16 a litre for fuel — and Airport Company SA fees have gone up.”
He said the group “never changed our fares in the system”.
“Whatever was already in the system stayed and the system automatically moved to a higher fare class because of the higher booking volumes and the time to the flights.”
Kirby Gordon, chief marketing officer of low-cost carrier FlySafair, said the idea of price gouging was “simply not true”. “Everything is on the system and everything is logged, so you can prove if you did or didn’t deliberately shove allocations into top-priced buckets.”
He said all fares were left exactly as they were by FlySafair, the only difference being that “for a change we sold all the way up the tree, so we were selling the expensive seats and they were actually the last seats available on the aircraft”.
SAA said it did not increase fares because of Comair’s temporary grounding.
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