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FlySafair responds to accusations of price gouging

The ‘ripple effect’ of the grounding of Comair ‘is just so bad for the entire tourism industry and our industry at large that it’s not something we would like to see persist’: Kirby Gordon – chief marketing officer.

FIFI PETERS: The Competition Commission has a warned airlines not to take advantage of the suspension of Comair by raising their own prices. This follows a report that a single plane ticket to Cape Town cost R5 000 following the suspension of British Airways and Kulula flights at the weekend. We have Kirby Gordon, the chief marketing officer at FlySafair, [with us] for more on this story. Kirby, thanks so much for your time. Just how has the suspension of Comair’s flights broadly affected your operations?

KIRBY GORDON: Evening, Fifi, and evening to the listeners. Thanks so much for the opportunity to chat with you again. Look, it’s been an incredibly tumultuous time in domestic aviation in South Africa. Airports, as you can imagine, have been awash with customers who have been stranded and desperate to try to get from A to B, as they need to. The reality is that Comair, between the two brands, operates about 40% of the domestic seat capacity. So effectively what happened on Saturday, when the airlines were grounded, was that four in every 10 passengers who were travelling anywhere were suddenly without any kind of carriage, and as a result were effectively stranded, and four in every 10 seats were removed from the market. So you can imagine that was a massive upset.

FIFI PETERS: What did that mean for your pricing, just having to come perhaps into the market to try and plug the gap that was left by the suspending of Comair?

KIRBY GORDON: To be honest with you, it doesn’t really mean a lot for our pricing at all. What it does mean is that, as airlines do across the world, we sell our first seats at the low [end of the price scale, due to consumer demand for those seats, while later seats are generally] more expensive. So when we closed our doors at the head office on Friday afternoon, we had set five seats at R2 000, five seats at R2 500, five seats at R3 000 – whatever the case may be. That’s how they sold throughout the weekend. Those price points were never changed. The allocations to those prices weren’t ever changed. So the reality is that that’s what we actually achieved in the end.

The only difference this time around, as opposed to any other random weekend within the week, was that we did sell out, because there was just so little capacity. On Monday there wasn’t a single FlySafair seat left empty. They were all full. On Monday there must have been one or two empty, because it was 99.6%. Tuesday again, 100% full.

FIFI PETERS: So you are not the airline then that charged R5 000 for a single flight to Cape Town, a one-way?

KIRBY GORDON: No. On our lowest, cheapest fare basis, I think our top price point is – I stand to be corrected – somewhere between R3 600 and perhaps R3 800. It could have, potentially I guess, been a business-class seat. But I don’t think that would be under question.

FIFI PETERS: Mm. I have a friend who is due to fly from PE [Gqeberha] to Johannesburg and her jaw dropped at the price in terms of it costing her around R4 000 to do so. Can you just comment on that route, or whether the prices differ depending on route?

KIRBY GORDON: Prices will. We effectively trade a commodity. When I wear my brand hat, of course I’ll tell you exactly how wonderful our brand is, and how differentiated it is to everybody in terms of our on-time performance and so on. But when we’re realistic about it, ours is a highly commoditised service. We can only fly as fast as everybody else. We have to fly through the same airports, fly the same aircraft, [and] the seats are the same. It’s a largely undifferentiated product.

So really we are price-takers when the market is well enough traded, as the South African domestic space generally is. In the short term now, especially as we approach a long weekend, some of those prices are very high. I’m sitting right now looking at the prices between OR Tambo and Cape Town and, if you want to jump on a flight tomorrow you’ll be lucky to get a seat, for starters. But, if you do, it’s probably going to cost you about R3 300. But if you want to do it next week Tuesday, it’s down to half of that, R1 500, and by the weekend it’s already R1 100. So it’s completely a matter of supply and demand. Last-minute tickets are always very expensive; it’s always [so] when we are selling the last seats on the aircraft, and especially, as I say, approaching a high-demand area [such] as the first long weekend of the year.

FIFI PETERS: The commission has indicated that it will be reaching out to the individual players in the airline industry, just to talk about what’s going on and how the Comair suspension is affecting them. Have you heard from the commission so far?

KIRBY GORDON: Yes, we have had some cursory engagements with them. They are keen to set up the conversation, which is awesome. Both as an individual and as an employee of FlySafair, I must tell you that I think it’s absolutely fantastic. It’s so wonderful to have an organisation like our CompCom that is conscious of what’s happening in the market, that is watching what’s going on, that is defending a free and fair market, and we are looking forward to chatting with them. We have no reservations about what’s going on.

FIFI PETERS: How do things change for the low-cost industry, based on how long Comair’s flights are grounded for? I’m just wondering if you’re preparing in any way for that eventuality.

KIRBY GORDON: Our hope is that our colleagues at Comair manage to satisfy the requirements that they need to satisfy so that they can get back into the air soon, because the reality is that the situation is not good for any of us. It’s nice in the short run that we’re obviously operating four flights, and that’s great for now, but the entire ecosystem infrastructure is at risk. For starters, it does start to put people off the idea of flying generally, so there’s a general kind of dissuasion from that action.

As you know, certainly higher prices would tend to do the same in the long run, but it also means that an entire infrastructure is losing a degree of its revenue because, as much as Comair isn’t there and gaining revenue right now from sales and operations, if you think of organisations such as Acsa, if you think of organisations such as the Civil Aviation Authority itself, Air Traffic Navigation Services, all of these organisations are losing 40% of their revenue as well, never mind the hotel owner in East London or the taxi driver in Cape Town, or the restaurant in George which is not going to have the opportunity to have all of the customers that it would’ve had over this long weekend. So the bigger kind of ripple effect of the scenario is just so bad for the entire tourism industry and for our industry at large that it’s not something that we would like to see persist.

FIFI PETERS: Kirby, just one last question. Notwithstanding the point that you did make about travelling over holidays, one of our listeners has actually sent us a screenshot of her flight booking for the weekend of April 14, returning on April 18 – that is the Easter long weekend, I do believe. She has booked a ticket for herself as well as one child. If you look at the ticket prices of this, they come at just over R5 000 each. So in total it’s around R10 250 – and that doesn’t include the taxes. If you include the taxes, her fare comes to R12 270. That’s for herself and a child. She claims that this is more than double what was paid on the last trip to Cape Town. Can you respond to that?

KIRBY GORDON: It’s quite likely that if you’re booking a flight over the Easter weekend and you’ve booked it recently, it’s very possible that it [is that]. It all depends on when the last time was that she travelled to Cape Town. It could be triple if she bought our price points on Johannesburg-Cape Town, for example, [which] differ from R699 to about R3 600 on the basic one. So that could be a six times increase if you ended up originally purchasing the lowest one and then ended up with one of the higher ones on your second purchase around. Those are the fares we are all used to paying over holiday periods.

FIFI PETERS: All right, Kirby, thanks so much for taking the questions. We’ll leave it there. Kirby Gordon is chief marketing officer at FlySafair.

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