Ven­ter speaks out on:

Finweek English Edition - - SPOTLIGHT -

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

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