239 | Air travel dip and rise – a wild winning horse

WONDER IF IT WILL BOOM– Townships need access to air travel. Many smaller outlining airports have turned to small carrier platforms, particularly charter services. However, what if, just what if, the underlying income profile of emerging townships was reinforced by regional air travel?

South Africa’s aviation market

The aviation economy in SA has been on an upward trajectory in terms of the number of passengers using our airports. From 39.8 million passengers in 2016/17 to about 41.6 million by 2019/20. The difference was turned on its head when lockdown struck. 

11.5 million international passengers flying in were reduced to 91 476; 10.4 million regional passengers were down to 2 477; and 29 million domestic passengers (travelling to local, international and regional destinations) were reduced to 2.2 million. 

This implies that the 7.1 million passenger strong domestic air travel market kept the air travel market alive. Unscheduled flights carried 121 609 passengers, an increase from 114 031 from last year.  

Airport traffic in terms of the number of passengers has dipped by 94.02% as of October 2020, to 2.5 million passengers. A decent departure and arrival balance is evident, which is a good indicator of airport utilisation (an aircraft perspective would depend on each airline). 

All in all, it simply means that there are two major wins. First, airlines are set to rise from a low base, so passenger volumes are set to grow by 90% or more in the rebound, plus a bit from the pent-up demand. This means, new players in SA are set to enjoy a different set of opportunities depending on the partnerships and service deals. 

Second, charter flight market is prime, prime, prime: virtually becoming a resilient and essential service offering in SA, and quite clearly a genuine niche. Even in the economic slowdown, travel may remain resilient because the soil is fertile to search for new business and get away, after this pandemic. 

Airlines on the move 

Sake, reported on CemAir’s significant performance in light of the pandemic, particularly for repatriation flights. 

Kulala and British Airways’ Comair faces an interesting scenario, as delisting may enable it to further reposition itself without the overtly transparent competitive environment of being a JSE-listed firm. 

South African Airways, is a mammoth of its own, and comparing the Business Rescue Plans between Comair and SAA does at least hint to the importance of business viability in principle. This is the fundamental issue here. 

What I see is that airlines with strong anchors like CemAir, FlySafair and businesses with strong fundamentals, like Airlink, operate in an advantageous space largely due to their closed loop of business development. No one could see their inherent strengths until the pandemic. 

Celebrated airlines around the world are virtually hanging on resilience. Ehtopia’s airline CEO made this clear early in the pandemic: the fittest will survive. But little did he know that the innovative will emerge. 

Interesting expectations for Lift, are similar to what one expected from Lyft, Uber and similar platforms, but for the aviation industry. We see this massive segment specific platform type offering in NetJets premium aviation offering for the unscheduled charter flight market in the US. 

Offering a service that cuts through the edges between traditional customer segments: especially the commuters who are at the cusp of rapidly growing companies, travel intensive executive roles, and a need to cut the crap between take-off and landing. Yes, the long-distance high speed rail market could attract such users, but it is very unlikely. 

In SA, it is rather clear that the aviation market is ripe for disruption—replicable, pervasive and aggressive disruption. If domestic airlines do not figure this out soon, their scale by 2021/2 could hide how outpaced they really are. Is everyone at the starting block? Probably.

Big question, tiny tweeks 

The big question is whether our airlines are geared to take-off in a whole new market, consumer preference space and service offering. 

This is almost 9/11 all over again. This time, the technology, consumer culture and business models just reflect both a new terrain and room for a whole new game. 

Big deal. Quantas, ultra-long-haul market was pushing the envelope, close-close to becoming the norm, in principle. A whole new segment and service offering that put pressure on a need for a new type of economy to compensate for the longer-in-flight experience. Shu. Guess what? Premium economy followed: for some it was a niche marketing for softer seats, some frills, and something that could actually turn to become the standard, a basic service. Truth is, it is and should be, at no true extra cost-to-value ratio. 

Lift. Similar, but different. Cutting the TravelStart ribbon and binding it into its business, practically operating a flexible business for both the customer and the company. At least from an outsider’s view. True story. It is an attempt to take the edge of the glacial airline company business model toward focusing on a more nimble, molten model that could simply follow the temperature and tempo of the market. 

Think about it. After Cambridge Analytica, every company understood that ‘behaviour’ is an asset. Not just the data. Modifying it is even more valuable. You know, pulling customers closer into the brand, locking them in with some type of subscription-synonym: think Amazon Prime. Get the client invested, like no other—in 1-Click, patent that. Lift should, seriously lock-on their business model, hide the efficiency gains and play hardball. 

Finally, the ratchet could rise, not for Lift, but for the non-price-competitive nature of the airline industry. Whatever happens next, will be breath-taking or worse.

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