New South African low-cost by SAA
Hi there, it seems as if South African Airways has finally decided on starting its own low-fare airline to compete with Kulula and 1Time, something they should have done ages ago. But there are also many that say that the SA government should not finance another state-owned airline after SAA and SA Express. Although I would say, if it pays, why not? Here is an article by the Business Day (Johannesburg): NATIONAL carrier South African Airways (SAA) move to launch a low-cost airline has met a turbulent reception from the domestic aviation industry, which says SA cannot afford a third government-owned airline. Government, through its wholly owned transport and logistics company Transnet, already owns 95% of SAA and 100% of regional carrier SA Express. SAA CEO Khaya Ngqula said yesterday the parastatal was "definitely going to launch its low-cost carrier before the end of this year". Speaking at the formal acceptance of SAA as the 18th member of the global airline group, Star Alliance, Ngqula said the planned airline would have its own management team and would operate at "arm's length" from SAA. The planned new entrant would compete with no-frills operators kulula.com and 1time for the growing low-end domestic flight market. Ngqula said the domestic market had grown about 30% since the first low-cost carrier took off five years ago. He said SAA had managed to capture only 5% of that market and this had prompted his executive team to change its business strategy. But not everybody welcomed SAA's plan. Kulula.com said government needed to focus on deregulating the domestic aviation market, and leave the operation of airlines to the private sector. Executive director Gidon Novick said governments in other parts of the world were relinquishing their ownership in the airline industry and SA should consider that option. "I would be surprised if the South African taxpayers have an appetite to subsidise a third state-owned airline," he said. Novick said the cost base of kulula was half that of SAA's and SAA's proposed new low-cost airline would have to match that to compete. Marketing and operations director at 1time Rodney James said the airline welcomed competition as long as it was based on the principle of fairness. "Unfortunately, when competition comes from SAA, it won't be fair because the taxpayers will be paying for it," he said. SAA had previously said that it had no intentions to launch a low-cost, no-frills airline. It had said its customers were mostly discerning business people who valued flight frequency, convenience, punctuality and reliability. In 2004 the national flag-carrier's CEO said SAA would compete with SA's low-cost carriers by reducing its prices from time to time. He said at the time that the airline would offer "all the frills at no-frill prices". But SAA admitted in its 2004-05 financial report that direct competition with budget airlines had negatively affected its bottom line. The parastatal said it had lost 1,8% of its average yields due to its attempt to match the air- fares offered by the budget airlines. Analysts said these losses and the cannibalisation of its market share by low-cost carriers had forced SAA to revise its strategy. Would be interesting to have another low-fare airline in the market... Cheers, Felix

bravo to South Africa passenger because the fare will go down hence services improved due to competition. I heard about DAR based low cost airline but it failed to take off due to financial matters. East african skies need low fare airline to cut the monopoly of KQ,TC,ET and PW

i'm totally against it. this is the worst thing for south african aviation and i hope the competition commission stops it

SAA -- LLC
Hi All , Sorry to go pointing to other forums but I have beed reading Denis Becketts book "JETLAG " about SAA and Coleman Andrews era....... and trying to do some reading and homework as it relates to the DUBE project. ALL is not as it seems.. Have a read here and see what the insiders have to say about the business ethics of SAA -- a company nearly insolvent. http://www.pprune.org/forums/archive/index.php/t-28436.html I never followed the SUNAIR saga much. I think that I know a bit more now. Still working on unraveling the inner circle.

Hi there, just wondered if there is any news around the subject out there. Cheers, Felix

AFAIK all systems are still go. SA has removed 4x B738s from it's summer schedule to accomodate the new LCC.

Word on the street is start date is Novemeber! Was going to be September and run within SA Express but they have bailed out! It will be a separate company, owned by SAA with separate management and staff. They will take over some 737-800s from SA and most likely run JNB-CPT and JNB-DBN to start. I have heard rumours of a target fleet size of 10 aircraft within a few years!

Can't wait to hear more and to see their aircrafts... Cheers, Felix

so basically all SAA are doing is moving planes from the existing fleet to a new airline? sounds pathetic to me and not a good airline for SA, cos its low cost but still gov funded and owned...it will still have unfair advantage over competitors due to gov's big purse. i dont support it

Hey Sean, you forgot Germanwings, Lufthansa's low-cost. Major carriers starting a low-cost can be a success, if the time and managment is right (both I doubt a bit with this one). Still hope it is going to be a success. Cheers, Felix

Very interesting development indeed. In as much as it will create more choice amongst the low-end flying public, it is in the interest of fairness that the proposed LCC should be privatised at the earliest to avoid any misconceptions of their operations being subsidized by the taxpayer. East african skies need low fare airline to cut the monopoly of KQ,TC,ET and PW I think this may be EASAX's long term strategy. I hope it is. Cheers, Walter.

I think a lot of people are getting this whole thing wrong, simply because they are listening to the trash coming out of the mouths of Comair (including Kulula) and 1Time! They are sacred of the comepetition. This whole argument about government subsidisation is poof simply because the whole idea of the LCC within SA is to reduce the cost structures of the business in order to remove the need for government subsidisation. Also important to note that SA are sourcing external capital from now on, particularly to fund the LCC! If it were to be government subsidised why would they be speaking to South African banks, rather than the South African government? The equipment being used is 737-800, since SA have excess machines that stand idle (i.e. the two machines that they lease to the Netherlands during the European summer charter season). I think we should be thankful that SA has steped in since we have Kulula masquerading as a LCC although they are, to some extend subsidised by the British government though Comair! So now it is a level playing field! :-)

I agree fully with Dysan. I hope the competition commission stops it. I believe that SAA will use unfair tactics and 'creative accounting' in their costing between the regular airline division and low cost airline division to fool people that they are making a profit out of low cost. It won't benefit the travelling public, as the taxpayer will continue to fund SAA.

Seems same happening in Europe
Iberia’s LCC to be called ‘Clickair’ -------------------------------------------------------------------------------- IBERIA’s low-cost carrier is to be called Clickair and could begin operations in October, according to a report on ABTN. In three years time the fleet is expected to comprise 30 aircraft. Iberia will codeshare with the new low-cost carrier, and Clickair is expected to take over some of Iberia’s maginal leisure routes. Clickair will initially fly to Spanish destinations, excluding Madrid, as well as Lisbon, Paris and Switzerland.