Imagine a soccer or rugby cup final in which one team had unlimited replacements, who do you think would win.
Well in the South African airline market that situation is a reality, and the economic and human costs are very significant. This is accentuated by the mini-price-war now being raged between Airlink and SA Express. Here is the reporting picked up so far:
Fin24 Sep 29 2013
"SA Express on Friday announced that it would be launching flights on three routes where Airlink had up to now enjoyed a monopoly: Cape Town to George, Johannesburg to Nelspruit, and Johannesburg to Pietermaritzburg."
Fin24 Oct 8 2013
"SA Express shocked the industry by announcing flights from Cape Town to George in direct competition with Airlink. Before the SA Express announcement, a one-way flight from Cape Town to George with Airlink cost R570 (excluding taxes/fuel surcharges). SA Express then had an opening special of R300 (excluding taxes/fuel surcharges) on the route, and Airlink has now responded with an astonishingly low R40 (excluding taxes/fuel surcharges) one-way fee from Cape Town to George."
IOL Travel 28 October
"It is hard to understand why the heavily
indebted SA Express, which told the parliamentary committee on public
enterprises this week that a R539-million government loan guarantee is
due to expire in February 2015 and is ordering a new fleet, should be
competing with Airlink by offering lower fares on three new routes all
at once."
Once again the players in the South African domestic airline industry have created a dichotomy of interests. At first glance, the consumer clearly wins, as the fares on these routes will reduce significantly. In broader economic terms this may not be true however. SA Express, like its bigger brother, is in dire financial straits, and subject to qualified audits, and unexplained unathorised expenditures. There are a wealth of financial articles eluding to this. So in reality, in the case of SAX, the reduced fares are in fact subsidised by the taxpayer, and so in the long run, the consumer does not really save.
In broader economic terms, the possibiity exists, once again, that the state will drive a vibrant private enterprise out of the market and out of business. There is little that a privately funded entity can do to counter a price war conducted by a state-owned enterprise with infinite cash, and 1Time and Velvet Sky bear witness to this, as do a string of SA airline failures starting way back with Flitestar.
Airlink roots go back pretty far and pre-date SA Express by a decade or so. Airlink has traditionally provided service on the so-called "thin routes", and in the early years provided a feeder service into larger carriers such as SA Express. Today it has broader scope and has become a powerful player in the regional market alongside SA Express.
SA Express has laboured along for nearly 20 years and has cost the country millions. It has now been called on by its owners to turn around its poor performance, and the immediate response has been to adopt a posture to remove competition. Through the narrow looking-glass this tactic sounds reasonable, and we can understand how the owners may fall for this approach.
The doomsday scenario, however, is that in 5 years we are left with a sad collection of state-owned "airlines" that continue to knock on Treasury's door every few months, are granted further funding, and achieve this by rewriting the "Grand Strategy" and the 20 year plan.
Once again the players in the South African domestic airline industry have created a dichotomy of interests. At first glance, the consumer clearly wins, as the fares on these routes will reduce significantly. In broader economic terms this may not be true however. SA Express, like its bigger brother, is in dire financial straits, and subject to qualified audits, and unexplained unathorised expenditures. There are a wealth of financial articles eluding to this. So in reality, in the case of SAX, the reduced fares are in fact subsidised by the taxpayer, and so in the long run, the consumer does not really save.
In broader economic terms, the possibiity exists, once again, that the state will drive a vibrant private enterprise out of the market and out of business. There is little that a privately funded entity can do to counter a price war conducted by a state-owned enterprise with infinite cash, and 1Time and Velvet Sky bear witness to this, as do a string of SA airline failures starting way back with Flitestar.
Airlink roots go back pretty far and pre-date SA Express by a decade or so. Airlink has traditionally provided service on the so-called "thin routes", and in the early years provided a feeder service into larger carriers such as SA Express. Today it has broader scope and has become a powerful player in the regional market alongside SA Express.
SA Express has laboured along for nearly 20 years and has cost the country millions. It has now been called on by its owners to turn around its poor performance, and the immediate response has been to adopt a posture to remove competition. Through the narrow looking-glass this tactic sounds reasonable, and we can understand how the owners may fall for this approach.
The doomsday scenario, however, is that in 5 years we are left with a sad collection of state-owned "airlines" that continue to knock on Treasury's door every few months, are granted further funding, and achieve this by rewriting the "Grand Strategy" and the 20 year plan.
