Demand for local air travel in South Africa remains “greatly constrained” with active airlines operating at just 6% of domestic capacity, Elmar Conradie, the boss of FlySafair has warned.
Responding to Moneyweb queries, Conradie said current low demand amid the Covid-19 pandemic and travel restrictions “isn’t enough to keep the industry going indefinitely”. He stressed that government support for the industry as a whole is needed.
“There’s really not much demand at all. It has also fluctuated greatly from day to day and week by week, which makes it difficult to match capacity with demand … FlySafair is pushing the boundaries to engage as much of our capacity as possible while keeping our operations viable,” he said.
“Profitability is a long way off at this stage. We are aiming for survival for now so that we have a chance at recovery when things return to normal … We are fleeted and staffed to operate upwards of 84 flights a day, but we are currently operating a quarter of that,” Conradie added.
He said FlySafair’s current aim is to keep the operations at hand cash positive, however, he noted that leases on the stationary aircraft still need to be covered.
“There’s no way we can come even close to finding profit while only utilising a quarter of our assets,” he noted.
FlySafair and SA Airlink are the only two major privately-owned airlines to be operating scheduled domestic flights currently in South Africa. Comair remains grounded as it struggles through a drawnout business rescue process.
State-owned SAA also remains grounded amid a business rescue and further multi-billion-rand government bailout plan. However, SAA’s low-cost subsidiary, Mango, is operating and competing directly with FlySafair amidst awful market conditions.
Under current Level 3 Covid-19 lockdown restrictions, only business and essential air travel is allowed. Domestic leisure travel, both inter-provincially and within a province, is still banned.
While the Tourism Business Council of South Africa (TBCSA), tourism and hospitality businesses themselves and other organisations have called on government to allow for domestic leisure travel, Conradie stopped short of this in his response to Moneyweb.
“We, like every citizen in South Africa, want our government to do the right things. If restricting movement for now remains the right thing to do, then we believe that the state should look to do the other right thing, which is to provide support for our industry through meaningful interventions,” he said.
“If the state provides support for some airlines, it should provide support for all airlines,” added Conradie.
“The aviation industry, by its nature, is incredibly vulnerable under these [Covid-19] circumstances. It is also an essential infrastructure to the economy: directly affecting the tourism sector, but also enabling many other sorts of businesses across our economy. We strongly believe that an investment into our industry would be a meaningful investment into the recovery of the larger South African economy,” he said.
Conradie stressed that financial relief for the airline industry did not have to come through “massive cash injections” but possibly through “temporary subsidisation” or discounting of aviation-related fees.
“Fees for services rendered by state-owned companies form a large part of the cost-base of operating an airline. These include the Air Traffic Navigation Service (ATNS), South African Weather Service (SAWS), Airports Company of SA (Acsa) and the South African Civil Aviation Authority (SACAA). These entities are all profitable, but also have the capacity to raise capital if needed against government guarantees, which would provide far more favourable terms than a private company could raise on the open market,” he explained.
Conradie said FlySafair employs around 1 131 people. The airline has a fleet of 17 aircraft and currently operates 10 domestic routes in the country.
“All of our staff are presently working, but we are all working on reduced hours for reduced salaries. We have not initiated any Section 189 retrenchment processes and aim to avoid doing so for as long as possible,” he added.