Bat­tle of the airlines

05 Octo­ber 2012 · TJ STRYDOM

Cash-​strapped low-​cost air­line 1time has turned to the gov­ern­ment for a bailout.

This life­line has low-​cost car­ri­ers seething.

The belea­guered national car­rier has incurred losses amount­ing toR17-​billion since the early 1990s.

A week ago it was hit by the res­ig­na­tion of seven of its board mem­bers, includ­ing chair Cheryl Carolus.

Comair CEO Erik Ven­ter said that the losses being incurred by pri­vate car­ri­ers meant that they would not be able to oper­ate. He said the life­line given to SAA was dri­ving low-​cost air­lines out of the market.

Ven­ter claimed that SAA and gov­ern­ment depart­ments we re breach­ing the state’ s own avi­a­tion trans­port policy.

He said nine of the 11 air­lines that entered the domes­tic mar­ket since the early 1990s have crashed financially.

The lat­est casu­alty was Vel­vet Sky, which had its wings clipped in March.

Ven­ter would not say that Comair would go so far as to insti­tute court action, but said he wanted to see the gov­ern­ment depart­ments com­ply­ing with avi­a­tion trans­port policy.

The air­line indus­try has been hit by a 50% rise in the price of jet fuel in two years.

The domes­tic mar­ket is suf­fer­ing from over­ca­pac­ity — too many seats for too few pas­sen­gers — a legacy of the opti­mism of 2010.

Pas­sen­ger num­bers are likely to dwin­dle fur­ther because of low eco­nomic growth.

Tar­iff increases of 70% imposed by the Air­ports Com­pany of SA have also put immense pres­sure on the airlines.

The state-​owned Acsa is one of 1time’s biggest creditors.

1time CEO Blacky Komani said yes­ter­day that his air­line owed Acsa as much as R130-​million.

Though 1time is not explic­itly ask­ing for a bailout, it does request “a reduc­tion in the fuel levy and taxes to the avi­a­tion indus­try to reduce the sig­nif­i­cant cost of fuel”.

Low-​cost air­lines oper­ate on very thin profit mar­gins and are extremely sen­si­tive to increases in the fuel price.

In a del­i­cately worded doc­u­ment addressed to the depart­ments of trans­port, pub­lic enter­prises and tourism, 1time’s “busi­ness res­cue prac­ti­tion­ers” ask for “subsidisation”.

Ger­hard Holtzhauzen, CEO of Strate­gic Turn­around Solu­tions, claims a new approach would ben­e­fit not only 1time.

Whilst this doc­u­ment wishes to address [sic] assis­tance pack­age for 1time air­line, it more impor­tantly addresses a res­cue pack­age for the indus­try as a whole,” Holtzhauzen wrote.

Apart from call­ing for a cut in the fuel levy, the doc­u­ment also sug­gests a reduc­tion in statu­tory levies imposed by Acsa, Air Traf­fic Nav­i­ga­tion Ser­vices, the SA Civil Avi­a­tion Author­ity and the SA Weather Service.

Holtzhauzen said both the Depart­ment of Trans­port and the Depart­ment of Pub­lic Enter­prises could imple­ment the requested sub­sidy scheme.

Min­is­ter of Pub­lic Enter­prises Malusi Gigaba returned from Ghana yes­ter­day morn­ing and has, accord­ing to his spokesman, not seen the document.

But the Depart­ment of Trans­port has acknowl­edged receipt of the doc­u­ment, accord­ing to 1time’s Komani.

Pub­lic Enter­prises is the owner of SAA and its sub­sidiaries and can, there­fore, get the national car­rier to buy into the scheme and ben­e­fit from it, he said.

The Depart­ment of Trans­port rep­re­sents the statu­tory bod­ies whose levies add to air­lines’ costs.

Arti­cle Posted On Times Live Click Here to see the article

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