South Africa’s Low-Cost Carriers Face Bumpy Ride
South Africa’s low-cost carriers have fallen into disarray as rising fuel costs and overcapacity take their toll on a domestic industry now hit by a spate of airline management resignations. Rodney James stepped down as CEO of OneTime airline, along with executive director Michael Kaminski, the company said March 13, without giving reasons for the departures.
Burdened by a comparatively aged fleet, African airlines face higher maintenance and fuel costs than carriers on other continents. Rising fees imposed by Airports Company South Africa (ACSA) have exacerbated the situation, with increases last October in passenger service, landing and aircraft parking charges at its network of South Africa’s 10 largest airports. ACSA operates the three major international airports of Johannesburg, Cape Town and Durban, along with seven others. Only one other major airport, Johannesburg’s Lanseria International, functions outside its orbit, and two of the three low-cost carriers that use it, state-run Mango and 1time, moved there in the past year. ACSA told AIN that it is now reconsidering plans for a further 30.6-percent increase in airport charges for the 2012/13 financial year because it is “sensitive to the financial challenges that airlines are experiencing.”
South Africa’s domestic airline industry has seen a 73-percent business failure rate since deregulation in 1991. “The weak economy and poor consumer spending, high oil prices, excessive ACSA charges, a weakening local currency and increased competition all threaten the growth of local air travel,” said OneTime rival Comair in January. Less than a month later, its influential chairman, Dave Novick, resigned, after 51 years of service. Comair reported a net loss in the six-month period that ended Dec. 31, 2011; revenue increases of 17 percent failed to keep up with fuel costs, which rose 24 percent.
By March 22 the South African Civil Aviation Authority temporarily withdrew low-fare airline Velvet Sky’s operating license. BP launched liquidation proceedings against Velvet Sky in February, saying the carrier owed it $3.8 million for fuel. Velvet Sky won a stay of execution with a revised business plan.
“Liquidation proceedings have ended and Velvet Sky will announce its plans to resume flights as soon as possible,” the airline announced on its website.
Separately, private-sector players have attacked Mango, owned by government-owned flag carrier South African Airways, for benefitting from state coffers.