SA’s Covid-ravaged airlines, which have been struggling to see daylight for the past 15 months, have been left reeling by the latest level 4 lockdown imposed by the government.
The restrictions, which bar leisure travel to and from Gauteng, SA’s economic hub and the province with the most Covid-19 infections, are expected to further delay a recovery for an industry which has been one of the worst affected by the pandemic.
The sector had already experienced a significant fall-off in demand over the past few weeks because people cut back on travel as the third wave of the pandemic gathered momentum, so the introduction of the level 4 lockdown is a body blow the industry can ill afford.
Furthermore, the sector, which is experiencing generally low passenger demand compared to 2019, is also faced with the possible return of SAA to the skies in the third quarter, which will increase supply in a market where demand is low.
Miles van der Molen, CEO of regional airline CemAir, said this week there had been an “enormous pull-back in demand” since President Cyril Ramaphosa announced the restrictions on Sunday evening.
“On Monday we were selling probably about 50% of what we would have sold a week ago, which was in turn about 50% of what we would have sold a couple of months ago. So effectively we are down to about 25% of the sales in April/May,” said Van der Molen.
“The difficult thing is we have the [president’s] speech but then the regulations only come out afterwards and sometimes they don’t match the speech. You have to find out what it means with no leisure travel in and out of Gauteng and what documentation you need to be able to travel. That results in people not knowing, and when people don't know they rather don’t travel.”
Airlink CEO Rodger Foster said it’s “tough out there and it’s just gotten a lot tougher” with the introduction of level 4 restrictions.
He said this is a setback “not only for Gautengers wanting to get out and visit the rest of the country” but also for the airline sector overall because there is virtually no corporate or international travel to help bolster domestic airlines at the moment.
“My personal view is that this is a step too far in stopping tourism from happening at a domestic level as we are already prohibiting tourism at international level by virtue of the fact that we’ve put ourselves on the red list,” said Foster.
Being on the red list — which means South Africans are barred from travelling to most countries — is a self-inflicted issue because the country has been unable to vaccinate its population quickly enough, he said.
Airlink is flying at about 60% of its pre-Covid capacity at the moment and that demand probably dropped about 10% in the past couple of weeks as the pandemic’s third wave gained momentum, Foster said.
Kirby Gordon, chief marketing officer of low-cost carrier FlySafair, said the “news of level 4 adjustments has obviously had a pretty severe impact on our industry — especially with the restrictions on travel into Gauteng”.
“It’s early days yet but we’ve seen a big drop-off on bookings and, understandably, a number of people opting for refunds to wallet. As I say, it’s still early to predict but we imagine things dropping to about 30% to 40% of 2019 levels again over this period,” said Gordon.
Sadly for the airline industry this negatively affects the green shoots showing prior to the third wave and the latest restrictions.
Gordon said: “Up until before this wave we saw that the South African domestic aviation space at large was operating at about 65% to 75% of the sort of seat capacity that we were seeing in 2019, which was encouraging.
“Airlines have been achieving much lower average ticket prices, which doesn’t necessarily mean sustainable operations, but at least there was a bit of demand. FlySafair was fortunate enough to be operating at about 85% of what we are capable of.”
Until sufficient people are vaccinated, the third and any waves will constrain recovery.
— Glenn Orsmond, CEO of Comair
Glenn Orsmond, CEO of Comair, said there had been “some positive signs of recovery in the domestic market” but that there is “still limited connecting business from international travellers, and domestic business travel has not yet returned to the extent that was anticipated”.
“Demand for all airlines is only at 60% of pre-Covid levels and yields remain low. Until sufficient people are vaccinated, the third wave and any subsequent waves will continue to constrain recovery,” he said.
Comair announced on Friday it had temporarily suspended all scheduled kulula.com and British Airways flights for three weeks in light of the move to adjusted level 4 lockdown, which prohibits non-essential travel to and from Gauteng.
It said flights would be suspended from Monday July 5 and that Comair aimed to restart services from July 30 “subject to regulations being eased and Covid-19 infection rates, particularly in Gauteng being contained”.
Comair, which operates low-cost carrier Kulula and the British Airways brand in SA, only resumed operations in December last year after temporarily halting them when it entered business rescue following the grounding of flights during the initial hard lockdown. The company is still in business rescue.
Another airline was added to the mix in SA when Lift was launched in December.
Lift is part of Global Aviation and was the only new airline globally to launch in 2020.
This week Lift said that in light of level 4 restrictions it had cancelled all flights on its Johannesburg-Cape Town route from July 5 to July 31, with the schedule set to resume, and that bookings would remain open from August 1.
“People are choosing to stay at home for now. Understandably so,” said Jonathan Ayache, CEO of Lift. “Our crew are also better off staying put until this wave recedes and the vaccination rollout reaches critical mass.”
Current sales of CemAir flights compared to sales in April and May.
— IN NUMBERS: 25%Current sales of CemAir flights compared to sales in April and May.
Lift flights would continue up to and including Sunday July 4. All Lift passengers affected by the cancellations will be provided with an alternative flight.
Global Aviation is part of the Takatso consortium, which is the state’s preferred strategic equity partner to take a 51% interest in SAA. Harith General Partners is the other group making up Takatso.
Contacted for comment this week about its relaunch dates, SAA said it was “targeting a relaunch in the third quarter of the year, Covid regulations permitting”.
But its rivals say SAA will have its work cut out for it.
Airlink’s Foster questions whether there is any space for SAA at the moment.
Foster said there is too much capacity in the sector as it is, and that the cheaper airfares, which have been needed to get passengers in seats, are lower than the costs of operating the aircraft.
“SAA is going to be returning to that environment. They will enter the market at a difficult time. It’s a bloodbath at the moment.”
Foster said SAA has also suffered reputational damage because of its highly publicised funding problems and, “due to the fact that it compromised its creditors and long-standing business partners, it will have to overcome this stigma and it is unlikely to be able to restore its credibility fully”.
CemAir’s Van der Molen agreed and said it is going to be difficult for SAA to find customers and general support from the public.
“A lot of people have viewed SAA as an extension of the government’s problems and everything that people don’t like about South Africa’s direction. Passenger confidence was severely damaged and to restore that is not going to be easy.”
Van der Molen said the sector is seeing “very low fares” along routes to Cape Town and Durban, for instance, that were way below costs. “Everyone is haemorrhaging cash and there is too much capacity in the market.”
FlySafair’s Gordon said SAA’s relaunch will “certainly provide that general supply shock, which in the present circumstances is not great for those currently contesting the market, especially given the circumstances”.
But Gordon said that in the long run “there is theoretically space to be filled if we assume that we are likely to recover to the sorts of demand levels we saw in 2019".
SAA did not respond to requests for further comment.
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