New low-cost carrier Skywise – which has not yet taken to the sky – has put up its hand to takeover South Africa Airways’ (SAA) domestic flight routes.
Rumours have been swirling that the national carrier might drop domestic flights, allowing its subsidiary Mango Airlines carry domestic flights. This is said to allow SAA to focus on its intercontinental flights.
Skywise which will join the ranks of low-cost carriers on March 5 says it welcomes taking up the challenge to fill the gap that would be possibly created by SAA.
“We are more than ready to assist passengers on our local routes with an equivalent service,” says CEO of Skywise Johan Borstlap.
Skywise will offer flights to Cape Town from Johannesburg with airfare costing below R500 (excluding taxes) for a one-way trip.
Speculations of SAA’s consolidation of domestic flights were fuelled by the acting CEO Nico Bezuidenhout saying the break-even cost for SAA’s domestic flights was R1 700 while Mango’s is about R900.
The discrepancies in the cost would make travellers go for the cheapest flight option, in the wake of high airfare costs already associated with the airline industry.
Bezuidenhout says SAA has 60% capacity to take on domestic flights, adding that Mango needs to now grow aggressively to take on the domestic market.
Skywise which was bought by aviation investment company Pak Africa from shareholders of the defunct 1time Airline will look at gaining up to 15% market share in the domestic airline industry.
Aviation economist Joachim Vermooten says despite the entrance and exodus of low-cost airlines there is still room for competition.
“Comair, SAA and Mango have all increased capacity. There is always capacity for a new entrant,” Vermooten explains.
Skywise’s foray into the market follows the launch of another low-cost carrier FlySafair five months ago which is aggressive in its pricing strategy.
Borstlap says since the demise of 1time Airline and Velvet Sky has created demand for air travel.
“The market itself has grown in the last two years, as there has been a 5% growth for air traffic. There is a fair amount of demand and we saw a gap. Even between ourselves and FlySafair we have not replenished what was taken over by 1time Airline and Velvet Sky,” he says.
The airline enters the market at time where the oil price has dropped significantly from around $116 per barrel in the last six months to $61. Borstlap says the decline of the oil price – the biggest expense for an airline – is coming to the airline’s advantage.
“We worked on a higher fuel price for the airline. We are happy with the results we are going to get now,” he says.
However, Vermooten says the benefit of low airfares for travellers might take a while given that airlines are locked in oil hedge agreements and costs in foreign currency.
Skywise will initially offer “between two to ten flights” a day between Johannesburg to Cape Town, offered through its two 737 aircrafts which it leases.
Borstlap says the company is contemplating adding another two aircrafts to its fleet which it may purchase. This will enable it to bolster its flight routes and possibly frequency of flights.
The airline has its eyes on expanding its routes to Port Elizabeth, Durban and East London, once it establishes itself. The airline is not shying from opportunities across the continent.
“We are aiming to expand across the border. There are still some routes which do have good capacity. We are all aware that Africa is a good place to go and that is where the money sits. Domestic side your margins are small,” says Borstlap.