After a mere seven months in the domestic passenger airline business FlySafair is performing in line with projections and set to announce new routes and extend its fleet, says CFO Elmar Conradie.
FlySafair started operations in October last year as the youngest subsidiary of 50-year-old freight carrier Safair, formerly known as Safmarine.
Up until then, the group had focused on aid and relief work, mostly in Africa. It did not have any scheduled flights, but offered regular flights on contract. Sometimes it provided services to other airlines. The diverse operations included flying troops and freight, including flights to Antarctica and transporting up to three rhino on a single flight and even an aquarium with a live shark inside!
With the 2012 demise of 1time Airline, to whom it provided flying services, Safair realised that while it used to have little appetite for the risks associated with a scheduled passenger service, it was exposed to it anyway.
As competitors initially failed to replace 1time’s capacity in the market and yields increased, Safair saw an opportunity and decided to take the plunge.
However, it took longer than expected to get going and FlySafair’s first flight only took off in October last year. Ironically, by that time 1time’s capacity had been replaced by other airlines. Since last year capacity in the market has increased by a full 6%, says Conradie.
FlySafair took off with two planes flying full-time and one back-up plane. In December another was added to the fleet, also flying full-time and negotiations for another back-up plane are being finalised. By October FlySafair hopes to have a fleet of five planes, two of which it will own.
The airline has scheduled flights between Johannesburg and Cape Town, George and Port Elizabeth (PE); as well as Cape Town to PE and George. It has submitted applications for further slots on new routes from Johannesburg and hopes to make an announcement in this regard in June.
Conradie says Safair knows how to fly; the aspect of the business it had to learn was how to work with paying passengers. FlySafair is trying to differentiate itself by superior customer service. “Not that the bar is set super high in the industry,” he adds.
He says FlySafair is targeting its marketing at all segments of the market. At the moment more than 10% of its passengers are first-time flyers. “First-time flyers find especially the airport very intimidating. They don’t know what to do and where to go. Sometimes they phone to say they are on their way and we should hold the aircraft. Some ask whether the parking fee is included in the ticket price,” Conradie says. While FlySafair does not have control over especially the airport experience, it tries to “put empathy in the customer experience,” he says.
The company says it also tries to make it easier for people who don’t have credit cards to access flights.
From an operational point of view the key to a successful low-cost airline is the load factor – how full the flights are. FlySafair’s target is 70% to be profitable. In December it managed 78% and in April 71% but, as expected with a start-up, some months were lower.
The airline further operates on a 25-minute turnaround time between flights. Most competitors work on 30 minutes. It means that after landing, the crew and ground staff have only 25 minutes to off-load, clean and reload the plane before the next flight. “It sounds insignificant, but 5 minutes is a lifetime in our industry. It gives us an extra half-hour per day and improves staff and aircraft utilisation. In the end we are able to do an extra flight per day as a result,” Conradie says.
FlySafair tried to squeeze in more flights per day by introducing very early flights, although this is constrained by limited airport operating hours. It operates the earliest flights between Cape Town and Johannesburg. While the airline was a bit apprehensive at first about the uptake at 5:30 and 5:45 respectively, passengers quickly realised the early flights can place them at their destination in time for a meeting at 8:00 and these flights are now among the most popular.
FlySafair was the first in South Africa to exclude baggage from the ticket price, says Conradie. Passengers pay R150 extra for a bag that is carried in the hold of the aircraft. Surprisingly less than 50% of passengers use this. Most are business travellers without baggage.
The FlySafair ticket only buys the right to “put a bum in a seat”. Other services are however available for those who want it, at an extra fee. These include travel insurance, catering, baggage, transporting special sports equipment, SMS flight confirmation, pre-selected seating, extra legroom and car rental through a partnership with First Car Rental.
As is common on the low-cost model, FlySafair does demand-based pricing – the longer in advance a flight is booked, the cheaper the ticket. Conradie says contrary to popular belief, a substantial number of its tickets are sold at the cheapest rate of R499 per ticket. Since October FlySafair has transported 400 000 passengers; 100 000 of these tickets were sold at R499 each.
He says the company hedges all its fuel purchases, but only three to four months in advance. It tries to match the hedging with ticket sales, that are also done largely three months in advance.
The currency is a huge factor as many airline expenses are paid in US dollars, he says.
Level playing field
The biggest challenge in the current domestic airline market is however increased capacity due to new entrants and others planning to enter.
That, and ensuring a level playing field between private airlines and SAA-owned Mango. Conradie says there has been a lot of focus on government bail-outs for the SAA group with Comair challenging an earlier bail-out in court. However, he believes the focus should rather be on fixing the root causes of SAA’s problems and bigger transparency.
Currently, he says, there is not enough detail to understand the Mango cost basis and form an opinion on whether any bail-out is used to develop new international routes or to subsidise the domestic routes.
However, he says it makes one wonder when it’s a battle to retain staff because SAA pays better salaries than private competitors, but the state-owned airline doesn’t have the details to make an informed statement.
Safair is 49%-owned by management, 25% by staff through a BEE structure and 25% by Safair Holdings, which is in turn owned by Irish ASL Aviation.