The last 10 years in South Africa has seen a remarkable drop in the real cost of flight prices. Airline prices are more or less the same in Rand terms as they were 10 years ago, but consumer price inflation has averaged 65%, meaning that in real terms the cost of a flight has fallen by about 65% – a massive drop. What makes the steady flight prices even more remarkable is that the price of oil (a major input into flight costs), has increased by some 300% over the last 10 years.
This economic miracle was brought about by the injection of competition in the form of low cost carriers, which cut costs to the bone and focused on fast turnaround times, coupled with the existence of 3 airlines which are willing to run at losses (the state-owned carriers).
Kulula got going in July 2001 and was joined by 1time in February 2004. Intensifying competition saw Nationwide go into liquidation in 2008 and Interlink in 2010. Velvet Sky joined the fray in 2011 and went into liquidation a year later.
The airlines which remain are struggling financially. If SAA were a private company it would have gone into liquidation as well; but itself, Mango & SA Express have the deep pockets of the government backing it. It’s deeply ironic that a government which, on the one hand says it is batting for the poor, on the other hand puts so much effort into the ongoing subsidisation of the flights of the wealthy, and this is one of the structural factors which keep flight prices low in South Africa – the existence of a company which can go into bankruptcy unscathed. However, this also drives private companies out of business, and this reduced competition in the long run isn’t good for the consumer.
I suspect that the financial struggle of the private airlines is going to be the catalyst for higher flight prices in South Africa – the 1time share is trading at a record low, and Comair (which runs the Kulula and British Airways brands in South Africa) posted its first loss in 50 years of operations. Not only do I think that we’ve seen the end of the era of cheap flights in South Africa, but also that we are going to see more and more innovations geared to make money out of the consumer. We’ve seen this in Europe already, where if you check in luggage with the likes of Ryanair or easyJet you’ve got to pay extra, in fact if you check in physically as opposed to electronically you’ve got to pay more. There are also extra charges if you don’t use a specific credit card.
We’ve already seen the beginnings of this – flight prices this year are higher than last year, and we’ve already seen Kulula tighten up on its luggage requirements, and Mango introducing wifi (which you have to pay for). Hold onto your seatbelts – nobody knows how high and how far the South African airlines are going to take us down this path.


















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