SOUTH AFRICAN LOW-COST AIRLINE FlySafair is on a rapid expansion flight path.

Guy Leitch (GL) chats to CEO Elmar Conradie (EC)

Guy Leitch.

GL: How is your post-Covid recovery going?

EC: The recovery is going well. We’ve been in a fortunate position to really take advantage of growth opportunities as the market recovered. We’re operating about 50% more flights per day than we did going into COVID.

GL: With the loss of capacity from Comair and Mango having closed down, there is a large excess of demand over supply – how long do you think this will last?

EC: There is an interesting dynamic at play in the market at the moment because there are so many factors including competitor dynamics, changing interest rates affecting people’s disposable income, changing confidence around COVID and particularly corporate travel policies, shifts in inbound international travel volumes, and the increasing cost of fuel.

When we lay this over expected seasonality trends it becomes pretty tough to really isolate any specific trend for certain. That said, the net result is that the South African domestic market is far smaller than it was pre-COVID in terms of supply. At this stage we estimate that about half of what was available then is up for sale now. What has been interesting is that with the higher load factors and increased frequencies we believe that the current passenger numbers are only 10% lower than before Comair exited the market. The question though is whether there is more demand now than before due to the changing dynamics mentioned before.

 ‘There is certainly opportunity in the market’

We are seeing very high load factors at the moment, during periods when they would have been good, but not very good. This is indicative of the market dynamics being out of sync in as much as that supply seems more easily overwhelmed by demand, but only when there is demand. What I mean by that is that there are times when the demand is obviously softer where loads and yields would indicate that the market is actually quite adequately served.In the bigger scheme of things, and with an optimistic view on economic recovery, we believe that there is certainly opportunity in the market and hence our expansion plans.

FlySafair’s Elmar Conradie.

GL: Are you finding it easy to get crews from Mango and Comair for these fleet additions?

EC: There were a number of great people who were displaced when those companies closed down. We have hired a good deal of those to help crew our expansions.

one in October and one in November. So that will take us up to a full fleet of 25 aircraft – twenty 738 NGs and the five classics.

GL: Are you now able to get 738s at much cheaper leases than before Covid?

EC: There were a few good deals to be had, but the market has started to recover and many lessors held back with a view to that ultimate recovery. The -800 market is so well traded that lease rates have returned to normal levels pretty fast.

‘the market is quite adequately served’

GL: As you expand internationally, are you considering widebodies?

EC: Not at this stage. Simplicity and standardisation are key elements to our business model and we still see a lot of potential for the 737s at this stage.

GL: You are expanding beyond South Africa – having already started Mauritius flights, and have applied for many other regional destinations. Are you hopeful that you will get these route rights, and when would you start operating them?

EC: Mauritius has been a wonderful extension to our existing route network and we certainly see an opportunity for further regional expansion. At this stage we are bound by the timelines that have been set down by the Air Services Licensing Council as we await their rulings on our applications and we are hopeful for success on at least some of those that we’ve applied for. We genuinely believe that we will be able to put on a service that will offer a capacity and a sustainable price point that will help some of these connections grow, ultimately benefitting South Africa with increased connectivity. As soon as we get confirmation [from the Air Services Licencing Council], we’ll initiate the projects to set everything up and isolate the metal to deploy on the new routes. We envisage services to start early 2023 if we get approval on our first routes in the next month or two.

‘offer a capacity and a sustainable price point’

GL: How much is the high fuel price impacting you?

EC: The fuel price is having a huge impact. Fuel is now 50% of our operating costs and this is greatly increasing the operating cost per available seat. Naturally this means that the minimum sustainable price point in the bigger pricing matrix will need to lift in order to maintain a sustainable operation.

GL: Can passengers expect the current high seat prices to continue through 2023?

EC: The traditional summer holiday period at the end of this year might see the market supply being squeezed a bit which could result in some higher prices, but there’s a good deal of capacity being brought into the local market by ourselves and other players. Already much of the constraint that was experienced on the first weekend of Comair’s market retraction has been alleviated by new capacity from existing carriers and we believe a lot of this will be eased by the end of the year. In fact, we believe that the existing carriers would have filled the gap left by Comair before the end of the year and that they will continue to add capacity into 2023 which will certainly result in lower fares. But higher fuel costs and a weaker Rand/USD exchange rate could hamper that.

GL: Are the Competition Commission’s concerns regarding ‘price gouging’ of concern?

EC: Our engagements with the commission have been very friendly and we believe that we’ve been conservative in our pricing so we have no concerns.

GL: Given what must now be much higher yields – how do your RPKs compare to 2019?

EC:Yields have indeed been higher, partly because demand is outweighing supply and partly because they need to be, given the crazy price of fuel. However, at the end of the day, as a percentage, margins are much where they were before. Of course, absolute numbers change thanks to these shifting dynamics.

GL: Talking about yields – you launched a business class offering. How is that working out and what do the passengers get, as they still have the same narrow seats – with the same seat pitch?

EC: We launched our Business Class solution in mid-2020, just after lockdown, and it’s been very well received. The model is based on the very common inter-European business class solution where airlines use the same seats but block or neutralise the centre seat in a row of three to offer customers a bit more space and, importantly, a bit more privacy.Our solution includes the blocked seat, 2 pieces of checked luggage at 23kgs each, a third piece of checked luggage for sports equipment at 32kg, priority boarding, priority baggage handling, full refundability to a voucher, unlimited penalty-free changes, and an R85 allowance for snacks and beverages off the trolley.

‘existing carriers would have filled the gap left by Comair by the end of the year’

GL: Can passengers expect the current high seat prices to continue through 2023?

EC: The traditional summer holiday period at the end of the year might see the market supply being squeezed a bit which could result in some higher prices, but there’s a good deal of capacity being brought into the local market by ourselves and other players. Already much of the constraint that was experienced on the first weekend of Comair’s market retraction has been alleviated by new capacity from existing carriers and we believe a lot of this will be eased by the end of the year. In fact, we believe that the existing carriers would have filled the gap left by Comair before the end of the year and that they will continue to add capacity into 2023, which will certainly result in lower fares. But higher fuel costs and a weaker Rand/USD exchange rate could hamper that.

GL: What will be your next big innovation?

EC: We’re working on loads of things all the time. Specifically, we like to focus on things that improve a customer’s experience in flying with the airline, so we spend a lot of time looking at things like empowering customers with the ability to make modifications to their own travel plans with ease and lowered expense, or simply to make the process of moving through the terminal easier. We’re doing some pretty cool things on WhatsApp at the moment, where we’ve been working with technology partners to help customers to access and manage their flight reservations through simple chats.

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