criscokid
Aug 8, 01, 11:15 am
Information source: http://news.ft.com/ft/gx.cgi/ftc?pagename=View&c=Article&cid=FT31P4Z71QC&live=true&query=KLM
The more demand, the less supply: the market has not been working in the way it should in the airline business between Europe and South Africa.
Despite increasing customer demand, there is an estimated shortage of about 4,500 seats a week on flights between South Africa and Western European cities.
As any frustrated travel agent, traveller or businessman will confirm, it is virtually impossible to find tickets for flights both to and from Europe. The shortage reached crisis point in July and is not expected to improve until at least the end of August. The reason for the shortage of seats is clear: in 1997, there were 74 airlines flying to South Africa. Now there are just 52.
In March this year, Austrian Airlines, Alitalia, the Italian carrier, and Sabena, the Belgian airline, stopped flying there, leaving a gaping hole which has led to this summer's ticket crisis.
All put the blame on one clearly identifiable culprit - the rand. The collapse in the South African currency's value against the US dollar has severely hurt airlines' profitability, forcing many to operate at a loss.
In the meantime - and here the laws of market economics have been respected - high demand coupled with limited supply has led to a sharp increase in prices.
"The price of the cheapest return ticket from South Africa has doubled since last year," said Juan van Rensburg, chairman of the board of airline representatives, which represents foreign carriers. "Prices have increased more in affluent markets, like the UK. But the increases have been necessary to step back from the brink and return to break-even."
However, while seat prices have increased everywhere, the airlines have found it difficult to raise prices enough for seats priced in rand.
The currency's collapse has made tickets unaffordable to most South African citizens. Airlines' main costs are all in dollars, from soaring fuel bills to airport charges and over-flying rights. The latter are particularly onerous on the Europe-South Africa routes, which involve flying over many African countries hungry for hard currency.
Apart from increasing prices, one way airlines have fought back is by limiting the number of tickets sold in South Africa. In some cases, the share allocated to local rand-paying customers has been reduced, exacerbating the shortage.
"Airlines are a business and they must make profits," said Mr Van Rensburg, who is also Emirates' regional manager for Southern Africa.
The Airport Company of South Africa (Acsa) is bracing itself for more departures of a permanent nature. Rumours abound that more airlines are about to give up on South Africa but so far the only one that has confirmed it is leaving is Yemen Air.
"It is a constantly unfolding scenario," said Siva Pillay, Acsa's business and market development executive. "Airlines do evaluations on a continuous basis. I can say is that no airlines will leave in the next month but it is impossible to predict beyond that."
British Airways is happy with the two additional slots it has just been granted but, says Amanda Ryles, BA general manager in South Africa: "If other EU carriers were to withdraw it would change conditions dramatically. We would then review our position and possibly step in."
Some other airlines, such as KLM, Iberia and Olympic, are increasing the number of flights. Acsa - a majority state-owned company in which Aeroporti di Roma has a 20 per cent stake - is lobbying the South African government to promote an open skies policy.
"We advocate a managed liberalisation of the skies," said Mashudu Ramano, chairman of Acsa.
"For instance, the capacity that South African Airways is not using should be made available for other carriers. This will draw more international airlines to the country and boost tourism."
The government has been pushing tourism as a source of job creation and hard currency. In a high-profile appointment, Cheryl Carolus, South Africa's high commissioner to the UK, has just been made head of Satour, the national tourism agency.
Yet as Richard Branson, chairman of the Virgin Group, warned on a recent trip to the country: "If passengers cannot get seats on flights to South Africa, they will choose other destinations. If tourism is to be allowed to grow, flights must meet demand."
In another bid to increase the number of flights, Acsa has also been pushing for licensing requirements for charter operations to be relaxed. "Any charter company wishing to bring foreign tourists to the country should be fully supported," Mr Ramano said.
Airtours, a UK-based tour operator, should start charter flights to Durban in 2002, subject to the results of a feasibility study to be completed next March. Other charter companies are at an advanced stage of negotiations.
In the meantime, the advice to businessmen and tourists who wish to travel between Europe and South Africa is a classic refrain: book early to avoid disappointment.
The more demand, the less supply: the market has not been working in the way it should in the airline business between Europe and South Africa.
Despite increasing customer demand, there is an estimated shortage of about 4,500 seats a week on flights between South Africa and Western European cities.
As any frustrated travel agent, traveller or businessman will confirm, it is virtually impossible to find tickets for flights both to and from Europe. The shortage reached crisis point in July and is not expected to improve until at least the end of August. The reason for the shortage of seats is clear: in 1997, there were 74 airlines flying to South Africa. Now there are just 52.
In March this year, Austrian Airlines, Alitalia, the Italian carrier, and Sabena, the Belgian airline, stopped flying there, leaving a gaping hole which has led to this summer's ticket crisis.
All put the blame on one clearly identifiable culprit - the rand. The collapse in the South African currency's value against the US dollar has severely hurt airlines' profitability, forcing many to operate at a loss.
In the meantime - and here the laws of market economics have been respected - high demand coupled with limited supply has led to a sharp increase in prices.
"The price of the cheapest return ticket from South Africa has doubled since last year," said Juan van Rensburg, chairman of the board of airline representatives, which represents foreign carriers. "Prices have increased more in affluent markets, like the UK. But the increases have been necessary to step back from the brink and return to break-even."
However, while seat prices have increased everywhere, the airlines have found it difficult to raise prices enough for seats priced in rand.
The currency's collapse has made tickets unaffordable to most South African citizens. Airlines' main costs are all in dollars, from soaring fuel bills to airport charges and over-flying rights. The latter are particularly onerous on the Europe-South Africa routes, which involve flying over many African countries hungry for hard currency.
Apart from increasing prices, one way airlines have fought back is by limiting the number of tickets sold in South Africa. In some cases, the share allocated to local rand-paying customers has been reduced, exacerbating the shortage.
"Airlines are a business and they must make profits," said Mr Van Rensburg, who is also Emirates' regional manager for Southern Africa.
The Airport Company of South Africa (Acsa) is bracing itself for more departures of a permanent nature. Rumours abound that more airlines are about to give up on South Africa but so far the only one that has confirmed it is leaving is Yemen Air.
"It is a constantly unfolding scenario," said Siva Pillay, Acsa's business and market development executive. "Airlines do evaluations on a continuous basis. I can say is that no airlines will leave in the next month but it is impossible to predict beyond that."
British Airways is happy with the two additional slots it has just been granted but, says Amanda Ryles, BA general manager in South Africa: "If other EU carriers were to withdraw it would change conditions dramatically. We would then review our position and possibly step in."
Some other airlines, such as KLM, Iberia and Olympic, are increasing the number of flights. Acsa - a majority state-owned company in which Aeroporti di Roma has a 20 per cent stake - is lobbying the South African government to promote an open skies policy.
"We advocate a managed liberalisation of the skies," said Mashudu Ramano, chairman of Acsa.
"For instance, the capacity that South African Airways is not using should be made available for other carriers. This will draw more international airlines to the country and boost tourism."
The government has been pushing tourism as a source of job creation and hard currency. In a high-profile appointment, Cheryl Carolus, South Africa's high commissioner to the UK, has just been made head of Satour, the national tourism agency.
Yet as Richard Branson, chairman of the Virgin Group, warned on a recent trip to the country: "If passengers cannot get seats on flights to South Africa, they will choose other destinations. If tourism is to be allowed to grow, flights must meet demand."
In another bid to increase the number of flights, Acsa has also been pushing for licensing requirements for charter operations to be relaxed. "Any charter company wishing to bring foreign tourists to the country should be fully supported," Mr Ramano said.
Airtours, a UK-based tour operator, should start charter flights to Durban in 2002, subject to the results of a feasibility study to be completed next March. Other charter companies are at an advanced stage of negotiations.
In the meantime, the advice to businessmen and tourists who wish to travel between Europe and South Africa is a classic refrain: book early to avoid disappointment.