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Aviation History
1996
1996 - 1010.PDF
Mm TRANSPORT South Africa's domestic aviation market is a potential goldmine waiting to be exploited. CHRIS YATES/MANCHESTER TO AN OUTSIDER, THE RECENT bout of high-profile airline collapses in the South African aviation industry might appear indicative of a market still in a state of flux. This is not the case, argue those who are still battling for a meaningful share of the potentially lucrative domestic market. "The departure of Phoenix, Flightstar and the others that come and go really doesn't affect the market a lot. A poor operator remains a poor operator and does not deserve to be in business," says John Hare, deputy chief executive of South African Airways (SAA). Hare believes that the market is "sta ble". It consists of around a half-million pas sengers a month domestically, but growth figures "...are not spectacular. It is similar to the country's overall growth position, and what we're seeing is a 4% or 5% rate." If the market is to grow at more than its pre sent rate, Hare argues that inexpensive air travel has to be introduced to people who do not usually travel by aeroplane. There is some "casual leisure travel", says Hare, but most people travel by road. He says: "It is an area where we should concentrate a lot of effort and, indeed, forms part of our business plan." He concedes that it would be difficult, if not impossible, to achieve that from within SAA because of the carrier's cost base, but adds: "It really means finding some alternative organi sational structure, firing it up, keeping it focused on that area and, then, away we go." Hare believes that secondary-level carrier SA Express (SAX) (in which SAA has a sizeable interest) is the ideal vehicle. SAX — which is modelled on the regional carriers associated with North America's major airlines — was by far the biggest start-up when it entered the domestic market two years ago. SAA gave SAX about 10% of its thinnest routes on start-up which is said to have generated 54% of the air line's revenue in its first year. POSITIVE OUTLOOK Don Wallace, chief operating officer of SAX, says: "We share a brand with SAA, operate in the smaller markets and use only turboprop aircraft. From our point of view, we can only report positive things. In the first quarter of this year, we saw a 15% growth in passenger traffic and a similar growth in yields. This market responds very well to frequency. For example, on the Johannesburg-Bloemfontein route, where SAA had, and still has, a double daily operation, we're up to seven flights a day now and we've increased the market by 35%". He claims that SAX is a disciple of the fact that, for every increase in frequency, there is a corresponding rise in the size of the market. "Growth boils down to frequency, seat avail ability and timing. The South African market, or at least the smaller end of it, has never been exposed to that," he says. Having carried over 600,000 passengers on its fleet of 12 Bombardier de Havilland Dash 8-3 00s, with an average load factor of 53%, the figures seem to bear out that assertion. Wallace admits that SAX's SAA branding made a big difference as the airline cut its niche in the marketplace. The SAA brand is a formidable presence, and one against which other start-ups have had difficulty in making their mark. That has partly contributed to recent failures. "There's more to running an airline than gassing the tank. The basic funda mentals in this market are that you have to have the top brand, scale, the best aircraft you can afford and the best people running the operation," he believes. Comair, SAX's key competitor, also recog nises that fact. Despite a half-century track record in South African aviation, the airline says that its perception in the marketplace is not consistent with its age. Keen to distinguish itself from the failed start-ups and to under score its presence, Comair has taken the unusual step of ensuring that passenger pay ments do not clear its books until the journey is completed. To enable this, it has established a multi-million Rand trust fund. Comair's director of marketing, Bert van der Linden, agrees with the SAA assertion that this 30 FLIGHT INTERNATIONAL 24 - 30 April 1996
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