Low-cost carrier FlySafair announced that it made a profit in 2016, the carrier’s second year of operations.
This despite a tough trading environment, with low economic growth and an oversupply of seats on domestic routes.
Last year proved to be a tough year for local airlines, with SAA’s low-cost carrier, Mango, posting a loss of R39 million, while SAA secured an additional state loan guarantee of R5 billion. Comair, operators of low-cost carrier Kulula, bemoaned similarly poor results, reporting a 10% increase in passenger numbers but a 12% decline in profits after taxation.
“There’s no doubt that the market is heavily traded at the moment with an excess supply of seats on domestic routes,” said FlySafair CEO Elmar Conradie.
“Fares are determined by a market and are very much at the mercy of the powers of supply and demand. If supply grows more than demand, prices will fall.”
Statistics published by Airports Company South Africa (ACSA) indicate that domestic passenger numbers grew by approximately 6% year-on-year in 2016, which is positive but was unfortunately outstripped by the supply of seats, which is said to have grown by as much as 12%.
“Now, more than ever, it’s essential that carriers focus on keeping their cost per seat as low as possible,” says Conradie, when asked how FlySafair managed to achieve such an impressive result.
“It’s essential that we drive efficiencies across all aspects of our business in order to remain competitive.”
FlySafair’s result is particularly impressive in the wake of the airline’s aggressive expansion in the past year. During 2016, it added three new aircraft to its operating fleet, bringing it to a total of nine aircraft. In August, the airline also launched new routes from Lanseria to Cape Town and George. The airline still managed to achieve a profit after these major growth investments.
There’s no doubt that this is a great time for the South African flying public. Airfares were said to have dropped by as much as 39% in 2015 on some routes FlySafair operates – a trend that continued through to 2016.
For airlines, it’s a tough time as carriers tussle it out in the marketplace to get bums on seats. “By the end of 2016, we’d flown more than 2.6 million passengers and maintained an on-time performance record of 95.8%, the best in South Africa,” says Conradie, commenting on why he believes customers choose his airline above others.
“There’s no doubt that price and great service play major roles, too,” he added.
Looking into 2017, Conradie said that FlySafair was looking at a year of consolidation.
“We’re looking at a few possible expansion plans, but the aim for this year is to slow the growth a little and work on making small differences that will improve our cost efficiencies in order to keep fares as low as possible.”
(image under CC BY-SA 2.0)