Some of South Africa’s smaller airports are seeking new regional status that would allow them to operate larger networks in the Southern African Development Community (SADC).
According to Susan van der Ryst, Corporate Communications Manager for Comair, South Africa had 47 international airports prior to 1995, which increased the risk for illegal entry into the country. “To tighten the borders and have proper customs facilities in place, the government imposed legislation to allow no more than 10 international airports in South Africa,” she says.
Van der Ryst points out that while charter airlines may benefit from having more international airports in South Africa, for commercial scheduled airlines, half the demand for regional flights comes from the long-haul international markets.
Nico Bezuidenhout, acting CEO of SAA, is also not convinced South Africa needs regional gateways. “The use of secondary airports remains a worldwide trend, but South Africa’s market is relatively small and the world-class infrastructure at our major centres fulfils the majority of market need at this time.”
Bezuidenhout adds that, while secondary airports have a proven track record in terms of effect on market stimulation, there are many factors that affect the outcome. “Regionally, bilateral regulations manage capacity between markets while international flights are unlikely to shift from existing infrastructure,” he says.
A potential increase in airports catering for regional flights will not necessarily create an environment in which LCCs flourish, as is the case in Europe. Van der Ryst says: “To operate a sustainable LCC, you need the critical mass. Short- and medium-term passenger volumes will not support a sustainable LCC service.”
Bezuidenhout agrees, pointing out that, although it has been proved internationally that regional airports stimulate the market, in smaller markets such as SA there may not be the demand to match this additional capacity.
LCCs already operating in the South African market dispute this, taking the view that the opening of new regional gateways would be welcome. For Oliver Wigdahl, VP Commercial Flysafair, any degree of liberalisation would encourage more competition.
Wigdahl believes more regional gateways would provide increased options for flight connections closer to a higher number of densely populated areas. “This has to be good for the South African travelling public, who will benefit from more convenient departure and arrival points, and keener airport charges, which translate into lower airfares and, in turn, more demand. This would boost national and local economies.”
Bezuidenhout warns, however, that although new regional airports in SA may lower operating costs and have a beneficial effect on passenger service charges, this is only a small portion of input cost when compared with fuel and maintenance. “In a market that is managed by bilaterals with limited capacity, demand often exceeds capacity and thus natural movement of pricing,” he comments.
Rodger Foster, CEO and MD of SA Airlink, believes the introduction of smaller airports will not necessarily bring down prices. “Hubs, such as OR Tambo, offer point-to-point travel as well as connectivity and bring economies of scale and purchasing power, which are not easily achievable at smaller regional airports.”
He says the reason why regional flights are often quite pricey is because the unit costs associated with smaller markets, and commensurately smaller aircraft, are far higher, as are operating costs at many over-border regional destinations.
Van der Ryst agrees that prices for regional flights are unlikely to decrease with more airports. “Prices could even increase due to the additional airport infrastructure and operating costs. The burden of increased operating costs will be placed on the airline and ultimately the fare price,” she says, adding that prices are subject to restricted frequency and/or seat capacity as per the bilateral agreements.
Wigdahl admits that, while smaller regional airports might charge lower passenger charges, limited local demand will determine the use of smaller aircraft with inferior economies of scale to match supply with demand. “With such aircraft, the costs are amortised over a smaller number of passengers, so costs, and therefore fares, will remain high.”
According to Wigdahl, regional airports would have to offer competitive charges. “They must ensure their facilities are able to accommodate larger aircraft and they must entice the larger aircraft operators to start services by recognising that part of the airport revenue stream must come from passenger revenues on-airport (retail, parking), rather than pushing all the cost on to airlines bringing the footfall to the airport.”
Despite differences in opinion on the need for additional regional gateways, all airlines agree that the SADC offers unparalleled potential for growth. Richard Bodin, fastjet’s chief commercial officer, says currently Africa only represents 3% of world aviation, allowing for huge opportunities. He believes the main hurdle for Africa is currently still the lack of liberalisation of the skies.
Bezuidenhout says bilateral agreements governing capacity, number of flights and number of carriers, continue to close out markets to competitors. “The Yamoussoukro Declaration, Africa’s open skies initiative, held the key to opening up markets. However it remains in initial stages of implementation.”
Foster, however, is confident about the future. Although certain bilateral air services agreements between states remain restrictive, he sees much positive progress made towards an open skies environment throughout the SADC region.