State obstacles impact slack SA airline demand

AASA CEO Chris Zweigenthal. (Kelvin Saunders/Supplied)
AASA CEO Chris Zweigenthal. (Kelvin Saunders/Supplied)

Cape Town  – South African airlines - and those in the rest of the region - are battling slackening demand and thinning profit margins, according to Chris Zweigenthal, CEO of the Airlines Association of Southern Africa (Aasa).

At Aasa's recent annual general assembly, they went as far as to talk of “unprecedented animosity levels” in the South African aviation industry.

This comes as fierce competition in the South African low cost airline sector caused an upheaval on Tuesday after some Skywise flights were cancelled. Skywise co-chair Javed Malik told, Fin24, however, that everything is back to normal and that all will be explained at a media conference later on Tuesday afternoon.

Skywise is the latest entrant to the SA low cost airline sector. The oversupply and slow passenger growth in this sector has caused an airline price war among competitors, which will most likely continue until one exits.

"It’s time for us to have a very hard look at ourselves. While airlines in the rest of the world are seeing rebounding growth and healthier 4% average profit margins, most African airlines have been unable to follow suit and remain stuck in an on average 0.8% per passenger profit margin band," explained Zweigenthal.

He emphasised that what is urgently needed is an alignment of governments’ policies and strategies to let airlines get on with their business in an efficient way for economic growth and job creation.

Aasa, therefore, called on governments, regulatory authorities, airlines, airports and service providers to form much closer engagements.  

“Year in, year out for the past quarter of a century we’ve attended talk shops where speaker after speaker laments the weak performance and lost opportunities, while policy makers express renewed commitments to opening up markets and connectivity across the region. Aasa and its members are appealing to governments to find the political will to make the necessary changes," said Zweigenthal.

“Instead, we continue to see obstacles to growth strewn across the runways. Government departments do not set out to sabotage airlines or their economies, but a siloed approach to policy making leads to unintended harmful consequences, even if policies and implementation strategies are conceived with the very best intentions."

He used South Africa’s new visa and immigration regulations as a prime example.

"The past 12 months have seen our industry and environment characterised by unprecedented levels of tension, frustration and animosity. We're not talking here about airline-against-airline competition for market share and new business. That would be natural and yes, for sure, carriers continue to compete fiercely for market share, especially following the entry of two new low-cost operators in South Africa," he explained.   

"No, the worrying unravelling I'm referring to is the result of government policies and differing responding strategies and tactics that have resulted in division between role players external to and within our aviation, travel and tourism sectors.

"This is playing straight into the hands of people and organisations playing a game of divide and rule to promote their own agendas, and manifesting with strong, hawkish and anti-business sentiment."

He repeatedly emphasised that the aviation industry should focus on action and avoid unnecessary conflict where possible.

"Conflict just undermines impetus and destroys value," cautioned Zweigenthal.

African aviation

He pointed out that the crisis in SA's aviation industry actually mirrors the lacklustre economic growth in many countries across the region.

The International Air Transport Association (Iata) forecasts a combined return of around $100m across the continent again this year.

"When one considers the size of the potential market, it is clear that this performance is hardly the basis for a sustainable industry,” said Zweigenthal.

"So much for a year that seemed full of promise when Africa’s transport and aviation ministers gathered in Pretoria where they acknowledged their governments’ recognition of air transport’s strategic role as an enabler of trade, business, tourism, economic growth and a driver for creating desperately needed jobs.

"They also reaffirmed their governments’ commitments to opening up their markets to other African carriers so that the entire region could reap these socio-economic rewards."

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