Is FlySafair price gouging and would fixed fares be better?

South African aviation is in turmoil. Our colleagues at Comair have had their fleet grounded and within minutes, 40% of the available seats were removed from the market. That’s a significant supply contraction in any market – we’re talking about 4 out of every 10 passengers that were set to fly suddenly being stuck on the ground.

Unsurprisingly, this has brought airline pricing into the spotlight and we’re actively engaging with the media and passengers to share insight into the industry’s pricing model and better explain how this system works.

It is important to note that FlySafair’s price points did not change before the ruling or after. However, as previously mentioned, the local airline market lost 40% of its capacity overnight. This means that just about every available seat on in-demand routes was full. In our case, we were at 100% capacity on Sunday, 99.6% on Monday and 100% on Tuesday. As for the rest of the week, we are sold out until Sunday. In response to this, our scheduling team is constantly evaluating our flight network and schedules to see where we can add capacity where it’s needed most.

In response to the current situation, the Competition Commission has issued a warning to airlines regarding a possible price gouging investigation. This proactive stance is great. It demonstrates the presence of institutions that are protecting the South African consumer, and we will cooperate with any information the commission needs to conduct their investigation.

But why do airfares seem more expensive?

Airlines work on a multi price-point system, where the first seats on a flight are sold at our lowest price-point. As the flight fills up and the departure date draws closer, the price of a seat starts to increase.

The South African Civil Aviation Authority’s ruling on Sunday has created a domino effect on local airfares. With 40% less capacity in the market, seats are selling out faster than ever before and we are reaching the higher end of the price point system a lot quicker than expected and flights are leaving full.

This is also all happening in the buildup to the first long weekend of the year as we look to celebrate Human Rights Day on Monday 21 March. At the time of writing this a flight to Cape Town from Johannesburg next week Tuesday is R1431 – far from the highest fare.

Should the airline pricing model change to a fixed price?

While fixed pricing would offer some advantages, this would not solve the current problem and could lead to unintended consequences. This model of pricing runs the risk of creating a price ceiling, major losses for airlines and the possibility of monopolisation.

In addition, a fixed price has the potential to exclude passengers from the market. Flights on FlySafair to Durban start from R431, which is well below our operating cost. Once you strip our airport taxes and VAT from that the airline is left with about R253 - anyone who’s visited a petrol pump recently will know that doesn’t get you too far. By pricing our airfares lower from the beginning, we are able to open travel to a wider economic audience. As airfares increase, we start to make back that loss over time.

If we were to set the price at R1 000 per flight, for the sake of argument, less advantaged passengers would miss out on being able to take advantage of a lower airfare. This puts the market at risk of shrinking as it excludes those who can’t afford to pay R1 000 to fly.

Fixed pricing is not the solution that will save the consumer or the industry. What we need is more capacity. However, this is not something that can be achieved overnight. At FlySafair we’re doing everything within our control to address the need for more capacity. Our teams are closely looking at our schedules and networks to see where it’s possible to add more flight frequencies.

In the meantime, we’re doing what we can to help out as many people as we can. We’ll never look to benefit unjustly, but we’re also a business that does need to show a profit and remain a sustainable entity that both employees and customers can look to for work and for great on-time and affordable flights.