FIFI PETERS: Comair has become the latest airline to resume flights. The operator of Kulula and British Airways returned to the skies today, and the CEO, Glenn Orsmond, joins us for the detail. Glenn, thanks so much for your time. What was the schedule looking like today?
GLENN ORSMOND: Thank you for having me. When we had the third-wave restrictions introduced on July 5, we announced we’d suspend operations and we’d start September 1, so we are pleased to start on our planned day. We launched today with our full schedule, about 100 air flights a day, and we’ll be growing steadily as we get closer towards the end of the year, as the seating picks up towards December.
It was well received. Flights were pretty full. Flights on time are obviously very important, and it was a great day for all of us. It was Spring, which is wonderful as well. Spring is in the air.
FIFI PETERS: Are you able to tell whether this travel was for business or for leisure?
GLENN ORSMOND: I guess if you look at the South African market pre-Covid, there were about 15 million departing passengers a year. The experience we had from about April, May, June, July stopped at about 10 million a year, if you take annualised. So the overall client markets dropped by about a third of what it was, and the fall in the market is mainly from two areas. The one is all the international commuting passengers aren’t coming in any more; they’ve effectively been blocked. So that’s a big chunk.
But the more important chunk is not flying –the South African business traveller. All the leisure travellers are doing their bit. They are flying almost at the same level that they were pre-Covid, but the South African business travellers are probably down to about 20%, 40% of pre-Covid levels. And that used to be about half our market.
So it has been tough and there’s been a fundamental change in how people travel in terms of business. Most business guys are sitting at home and doing Teams and Zoom, rather than travelling for face-to-face meetings.
FIFI PETERS: Since July, then, when you grounded your fleet as a result of the lockdown Level 4, what happened to your staff, and what’s the situation looking like now that you’re back in the sky?
GLENN ORSMOND: They introduced the restrictions on July 5, and effectively there was a prohibition for most of the month, and we then needed a month to restart again. Hence our September 1 planned date. The staff has taking reduced salaries for the months of July and August, and for the amount that it was reduced by, that has been deferred and they will be paid that later.
But it has really been tough on staff. If you take the South African air-travel market has dropped, as I said, by one third, that’s impacted on our staff numbers. So while the airline will probably be about 70%, 80% of the size it was pre-Covid, our staff numbers will have dropped from about 2 000 to about 1 300. So staff have borne the brunt of the impact of Covid. It’s forced us all to become more efficient and more competitive.
What’s really great is, if you look at the air fares from today, all the airlines have dropped the air fares. So the real big loser in July and August was just the higher air fare. So if you take July, August, the market probably dropped about 15%, 20%, and the airlines that stayed on really just raised airfares probably by 100%. So at least you’ve seen all those air fares have fallen now that we are in the sky again.
So hopefully that will stimulate travel as well, because the market needs competition and there’s been no competition for the past two months.
FIFI PETERS: And how sustainable is that, though, Glenn? I saw a headline – was in yesterday – where the price of oil just went up yet again. So how sustainable are lower air fares in your view?
GLENN ORSMOND: If you look at the market, we are the only guys that run two brands. We run the low-cost brand, which is the Kulula brand, and then importantly we run the British Airways brand. The British Airways brand is obviously a superior brand and right now it’s the only airline that offers a product for the business traveller. We have fleet we need to work, we have high frequencies, we have an excellent product, leg room, and importantly we have the Frequent Flyer mileage programme. So the market is happy to pay a premium for that.
I’m talking about the leisure market really, where sustainable air fares are the air fares being charged now, and probably the air fares for the past month or two were way in excess of what’s required to earn reasonable margins.
FIFI PETERS: And in this almost two months or couple of weeks that you have been away, I imagine that quite a lot of planning has been done at board level to come back and come back stronger. So are you planning to do anything differently at this time around? And if so, what?
GLENN ORSMOND: Yes, reasonably. We think for 75 years we’ve had the first wave of Covid which forced us into business rescue for eight months. We then started again on December 1 last year and survived through the second wave which struck. And then the third wave was really a lot tougher, since there was a prohibition on Gauteng air travel. So it was really tough and we’ve had to right-size our business.
We’ve had to say that the new reality is that the market is smaller by a third of what it was, and our focus in this period has just been to right-size the business way down in line with what the size of the market is.
So we feel confident that we’ve achieved that now our break-even load factors are extremely low, lower than they’ve ever been. We’ve invested early in technology as well. So we’ve managed to … the Kulula app, which is bringing down our distribution costs. So there’s a whole host of things we’ve been doing this two months. In fact, I was just saying it’s the hardest I’ve worked this past two months when we weren’t flying.
FIFI PETERS: I read an article suggesting that you were looking at new routes, one of them possibly being Mauritius – is this true?
GLENN ORSMOND: We’ve always flown to Mauritius. We weren’t able to fly because of the Covid regulations. They’ve now lifted it in terms of Travel Advisory, so…
South Africans can now fly to Mauritius, provided you’ve been vaccinated and you do the 72-hour test.
There’s no need when you are arriving in Mauritius to undergo a period of quarantine. So we’ve just added two flights a week now, and I think South Africans are so relieved. We’ve had a massive surge in bookings. We fly to Mauritius Tuesdays and Saturdays, so South Africans can have a three-day, four-day, seven-day package, whatever works for them, and by far it is the best deal right now. It’s not that we are starting – it’s just reintroducing the flights that we had.
FIFI PETERS: All right, Glenn, we’ll leave it there. Very fortunate South Africans can take a break from all this economic headache that the pandemic has brought and gone to the island of Mauritius and to drink some coconut juice. I wish I was one of them. Maybe in another lifetime, or maybe very soon. But that was Glenn Orsmond, the CEO at Comair.