The ongoing effects of airline industry turbulence

The airline industry was dramatically impacted by the outbreak of Covid-19, and recovery has been bumpy. Travellers have been faced with long queues, exorbitant ticket prices, and delayed or cancelled flights.

This article considers the ongoing effects, and what travellers can expect ahead of the holiday season.

Tip: It pays to protect the contents of your home when you travel. Find out more about household insurance here.

Why is the airline industry experiencing turbulence?

Flying in a post-pandemic world has been chaotic. Airlines have gone into liquidation, new entrants have emerged in the market, and ticket prices have increased due to limited seating and the rising cost of jet fuel. Cape Town International Airport experienced a shortage of jet fuel recently, which affected flight schedules.

Prospective travellers are having to think carefully about their flight plans, as demand for seats currently outstrips supply. Those planning to fly during the holiday season should book now as delaying will likely result in having to pay more for tickets.

Linden Birns, owner and managing director at Plane Talking, an inflight products supplier, delineates the crisis.

“South African Airways operates at only about 10% of its routes since it went into business rescue, and doesn’t have as many aircraft as before,” he says.

“Comair grounded its British Airways and Kulula flights in May, and Mango is no longer flying. A lot of capacity has been taken out of the air.”

Birns says that if you have previously made a last-minute booking by picking up cancelled or standby discount tickets, this option may not be available to you. “You’re unlikely to find such tickets,” he warns.

While remaining airlines FlySafair, Airlink, Cemair, and Lift will try to add capacity where they can, consumers may still struggle to find tickets – never mind appropriately-priced options.

The inflationary cost environment

Those airlines that are operating are still in post-pandemic recovery mode. During the pandemic, they incurred a lot of debt to stay afloat. Now they are trying to clear that debt while operating in an inflationary environment.

The situation is worsened by the war between Russia and Ukraine, and the escalating oil and fuel prices, which have a negative impact on jet fuel price and availability.

Birns says the gap between jet fuel and crude oil prices has almost trebled. Historically, jet fuel was priced at around $15 to $20 a barrel, but it is currently between $50 and $60. This has had a huge impact on airlines’ cost base, with jet fuel now twice the price it was in October 2021.

South Africa no longer manufactures fuel in sufficient volume, which means we are heavily reliant on imports, which adds the cost of shipping, local transport and storage facilities to the airline industry’s burdens.

Another factor is the floods in Durban earlier this year, which washed away the main railway lines that were used to transport jet fuel from Durban harbour up to the reef. Alternative plans had to be made, such as bringing fuel overland from Maputo.

Added to this are high interest rates pushing up the cost of financing, along with the rand weakening against a surging dollar. The additional expenses the airlines must pay are passed on to consumers, who are probably paying 60%-70% more than they were in 2019 or early 2020.

Will the airline industry rebound?

Guy Leitch, publisher and editor of SA Flyer Magazine, says the airline industry has already bounced back to 78% of pre-Covid levels.

“We’re heading towards a post-Covid equilibrium between supply and demand, and we may find demand matching supply just after Christmas this year,” he says.

“Currently, there is a drop in demand of about 20%-25% because of the high cost of tickets, but airlines are also gaining passengers from airlines that stopped operating. However, prices are stabilising, and I think we’ll soon see flights that aren’t 100% full.”

As fuel prices come down, more people will take to the skies, he says. However, it’s still a good idea to book early if you have holiday plans, due to capacity constraints.

Even though load shedding, expensive plane tickets, and perceptions of an unsafe environment are keeping many international tourists away, locals are keen to resume travel.

Tip: If you’re travelling by car this holiday season, make sure you have vehicle insurance in place. Find out more here.