Venter speaks out on:
The oil price: “I think the real price − in terms of supply and demand, and the fundamentals of the oil industry − is $80 a barrel and I think it will be back there at the end of the year.” The Comair cabin crew dispute: “It’s a very slow and drawn-out process but discussions are still ongoing. Threats of strike seem to be standard in the negotiating procedure in South Africa nowadays. Whether it will actually get to that we will have to see, but I think we are making headway.” SAA ’s turnaround plan: “It’s not enough. It’s too little, too late. If it is the start of something bigger then great, but there needs to be some very serious strategic changes to really make a difference and I am not sure whether government has the appetite to take on that kind of restructuring to get SAA back to breakeven.” Comair’s challenge of SAA ’s financial aid: “What Comair wants to achieve is recognition that the funding of SAA is an allocation of taxpayers’ money and should go through the proper parliamentary budget process. The reality is that SAA is not going to be able to pay back these loans and it is going to affect the fiscus in the future.” The court date is set for 5-7 May. think of all the consequences if things don’t work out as planned,” he says.
Even while the company posted revenue growth of 5%, attributed to a 3% increase in average yield and a 2% increase in occupancy, Venter says it is unlikely that the 17% revenue growth of the previous financial year will be achieved come June. “I think we will be lucky if we see 5% revenue growth for the full year,” he says. saving on the dollar oil price of R100m, the R160m incurred by the weakening of the exchange rate offset this. In effect, a R60m increase in costs that translated into increased operating expenses of 2% for the period.
Operating expenses for the second half of the year will increase, says Venter. “We will not be able to dodge the inflation bullet and I think the oil price will rise again.” While Comair hedged 26% of its fuel at $82 a barrel even if it were to buy oil now for the remaining 10 months, this would come out at around $75 a barrel. “The market pricing is already way above the current pricing.”
Even given the increased operating expenses, the company is likely to offer some reduction in pricing in the short term. But the very low prices offered by competitors are not sustainable in the long term, says Venter. “There is not enough margin for any serious discounting. We are running on about a 5% margin on the most eff icient aircraft, so we could drop prices by about 5% to get to breakeven. For the new carriers coming in with older aircraft, they don’t even have that 5% luxury to start with,” he says.
The advent of new carriers FlySafair and Skywise, the latter due to launch in March, could see competition heating up for a short period for smaller routes with low passenger numbers. But this is likely to cool off if these airlines up their prices, says Venter. On the bigger