The airline industry will continue to operate in a very tough, competitive environment, largely driven by the slow economic growth projection of around 1,5% for South Africa, predicts Chris Zweigenthal, CEO of the Airlines Association of Southern Africa.
“Within this environment, airlines will try to consolidate their positions and also improve performances from a tough 2015 towards sustainable profitability in 2016.”
This year will be about the survival of the fittest once more, predicts Rodger Foster. “The environment is extremely tough and hostile at present – clearly the market is grossly overtraded. I expect there to be some capacity fall-out.”
He adds that low fares will continue into 2016, which will be an advantage for customers and the travel trade. However, airlines will continue struggling as there are no indications of a radical economic turnaround in the foreseeable future, he says.
Despite these dire predictions, Zweigenthal says the domestic airline industry is expected to experience passenger growth of between 2% and 3% per annum, with the international market experiencing similar growth. “Yields will continue to be competitive, with profitability margins on average still around breakeven due to the slow economic growth within South Africa.”
International airlines, particularly those from the Gulf, Turkey and Europe, will continue to look for opportunities to expand operations within Africa, says Zweigenthal, adding that airlines in Africa operating international services will continue to face stiff competition from the international airlines operating to Africa. “High operating costs, especially those that are dollar driven will need to be closely controlled and reduced where possible in this environment.”
The African Union, supported by South Africa, has plans to achieve a Single African Aviation market by 2017, notes Zweigenthal. “In 2016 it will be important for the African Union and its respective aviation organisations to push this agenda and extend the commitment to this goal beyond the 11 states that agreed to this goal in early 2015.”
