As featured and advertised in the July 2011 issue of Skyways, Airlink's inflight magazine
One of the most common queries directed at Airlink relates to the perception that our airfares are exorbitant. Our standard full economy fare is frequently compared against the most discounted Low Cost Carrier fare available. This comparison is inappropriate and grossly unfair.
The challenges confronting an airline business today include soaring input costs, including but not limited to employment costs, airport charges, Air Traffic Control charges, Safety Oversight charges and fuel. Energy cost may not seem to materially directly add to input cost, but the indirect effect of competing for consumer disposable cash should not be ignored. The same is true to the effects of galloping fuel cost inflation, where there is a material direct consequence, and so too an indirect effect where the price of fuel is absorbing liquidity from the economy. A further indirect effect manifests in food price inflation with similar consequences. Administrative inflation has also, in recent years, played a significant role in input cost creep.
Undoubtedly, in the post Soccer World Cup South Africa, where the consequences of the global recession have gained traction in our local economy, the consumer is more discerning now than ever before given his “cash on hand” shortcomings. Understandably, the local consumer considers the buying power of the Rand in the home market in isolation to other currencies. It is of no consequence to the South African traveler what the exchange rate is ZAR to USD, or EUR or GBP (the hard currencies typically airline input costs are comprised of), or what the Rand equivalent of what similar products or services cost elsewhere. To the contrary, if it costs a Dollar in Washington, the South African consumer expects the equivalent product or service for a Rand in Cape Town! Airlink is sensitive to this expectation. One can’t blame the consumer for sniffing out the best value proposition in the current market – price rather than brand loyalty.
Whereas the point to point carriers (LCC’s) operate on high volume city pairs such as Johannesburg – Cape Town, Airlink operates on thin routes linking smaller communities via main hubs like Johannesburg to the world and vice versa. Dense markets lend to lead pricing to attract buyers. Where high volume routes enjoy balanced directional flow, an imbalance exists on the thinner routes. Airlink is a network system airline, and a component of a large composite airline network system that includes SAA and SA Express. This composite system enables interconnectivity and opens up a myriad of travel options to our customers. Approximately 45% of all Airlink passengers connect to or from beyond destinations. Ticketing and fare constructions are often complicated.
Rather than apples for pears comparisons, we believe that it is fair to compare like for like. Airlink has historically tracked a basket of similar air services offered by Regional Network airlines in North America, Europe and Australasia. After all, we operate the same kinds of aircraft, maintain and operate our aircraft to global standards, use the same source of supply for our aircraft spares, and use the same fuel which is a globally denominated commodity. The only glaringly obvious cost differential is that of labour, where most of the high skilled labour (e.g. pilots and maintenance engineers) are priced in parity with global trends, thus negating any local material cost advantage. Our continuous observation is that where the average Airlink fare per km inclusive of YR Taxes (fuel and insurance levy – de facto an element of ticket revenue) is R3.49/km, in comparison the average global basket fare is R11.09/km. Airlink’s average fare remains less than one third of the average of our global counterparts for like for like service offerings. Check it if you like. Get an all inclusive fare quote Munich – Prague, Atlanta – Albany, Toronto – Columbus, or London – Cologne.
We have recently completed an interesting study that has tracked and indexed movement as regards input costs and nominal achieved fare having regard for passenger volume increase. Over the past nine years, Airlink passenger volume has increased 168%. Over the same period; the fuel price has increased 217%, total expense per passenger has increased by 131%. Yet real yield per passenger has decreased by 18%!
In considering the trends over the past two years, on typical short sector domestic routes passengers are currently paying 20% (5% over Airlink’s entire system of 27 routes) less than two years ago where fuel has increased by almost 50% over the same period. Two years ago about 85% of the fare paid by the passenger ended up as airline revenue (the rest going to taxes and airport charges) whereas based on current achieved fares, airlines are only achieving 66% (81% system wide) of what was being achieved two years ago. So fares have factually defied inflation and particularly the massive input cost escalation and have materially decreased.
In any business it is paramount that revenue exceeds total costs. As a privately owned business, naturally we have not based our sustenance on taxpayer subventions, rather on finding the delicate positive balance of volume and yield in ensuring that there is always marginally more revenue than cost. And we have had to cut our suit according to our cloth.
Airlink has over the years invested in the most modern aircraft that are affordable in terms of our propensity to generate enough revenue to cover the blend of fixed and variable costs given our limited ability to “sweat” the asset on typically thinner routes. Accordingly, in more recent times we have opted for good recent model used aircraft rather than high capital value brand new aircraft which do not lend themselves well to the unique challenges of Airlink’s markets. Admittedly we bear the brunt of marginally higher direct variable operating costs (especially fuel consumption related expenditure), but these are more than offset by our dramatically reduced fixed costs (ownership and insurance costs).
We recently took a direct comparison of the cheapest LCC fare available on the Johannesburg Durban City pair on a Friday afternoon (peak demand time) in comparison with Airlink’s fare available on the Pietermaritzburg route. Airlink’s fare was at least 20% cheaper! And Airlink does not practise overbooking – so you won’t get bumped off your Airlink flight.
There is no hard and fast fare for air services. Achieved fares are what the customer is willing to pay on the day given the competitive market forces.
Airlink rests well in the knowledge that we deliver world class air services at the highest standards at the most affordable prices. Airlink is IOSA (International Air Travel Association Operational Safety Audit) accredited. Airlink customers really do get exceptional value for spend at less than one third of the global average of equivalent service.
The myth of Airlink fares being exorbitant is well and truly busted!
As featured and advertised in the July 2011 issue of Skyways, Airlink's inflight magazine
Set in beautiful surroundings, on the rolling hills of Balgowan, at the centre of the KZN Midlands, this highly sought after wedding, conference and leisure venue is completely unique. The quiet elegance, heartfelt hospitality and excellent cuisine and service are enhanced by the diverse activities on offer, both on site and in the surrounding Midlands Meander. Woodridge is a stylish four-star Hotel, featuring gourmet African cuisine, access to three top class golf courses, and a spa. The Zulu Kingdom is unique in South Africa, being the only province with a monarchy. This adventure playground is the perfect place to sooth the weary soul. African, Eastern and European cultures mingle to offer a glimpse into the soul of Africa.
A quick trip to Woodridge just won’t allow you the time to take in all the gems of the area. The Midlands is the gateway to the magnificent World Heritage Site, the uKhahlamba-Drakensburg Mountains, but you can also explore the battlefields of the Boer-Zulu and Anglo-Boer Wars, or simply take in the breathtaking landscapes and kaleidoscope of colours as the season change in the Midlands countryside. Don’t miss the opportunity to visit one of the most spectacular San rock painting sites in South Africa.
The Midlands hosts a great many international events such as the Comrades and Dusi marathons, as well as the famous long distance swim, the Midmar Mile. The area is a fishing mecca, for trout, bass and yellow fish. The Midlands boasts its own brewery and an infant wine industry. You can watch or play a polo game, visit a casino, or play golf at one of the many beautiful golf courses.
Woodridge is not only a holiday destination, but all offers facilities for conferences, corporate events and is a popular wedding venue for both local and international brides. The Midlands Meander boasts one of South Africa’s best arts and crafts routes, and the Tatham Art Gallery in Pietermaritzburg is rated as one of the top five in South Africa, and provides a taste of the rich artistic culture of the area. Woodridge Country Estate is perfectly situated to facilitate your journey of discovery.
Woodridge Country Hotel and Spa offers accommodation in 10 deluxe suites, five family chalets or 27 valley or forest suites, all tastefully decorated. All rooms have on-suite bathrooms with bath, basin, toilet and separate shower. The rooms and chalets are equipped with heaters, hairdryers, TVs (with selected DSTV channels), electric blankets, natural homemade bath and body products as well as tea/coffee facilities with oven baked biscuits. Most hotel rooms also have full internet wireless connectivity and excellent cellphone reception. Facilities include a spa, picturesque chapel and wildlife nature reserve ideal for local and destination weddings, conferences, corporate events or just to relax, catch up and unwind.
Isibaya A La Carte Restaurant
Our menu is inspired by the riches of the African continent. Fresh local produce is used to prepare tasty home cooked meals. Isibaya is open daily for dinner and breakfast and on Sunday for lunch.
A truly outdoor African eating extravaganza within the Nature Reserve. Food is prepared on open fires including various options – traditional SA Braai, potjies and other exciting options. Taste Africa in the outdoors under starlit skys.
This newly re-decorated Restaurant offers an adventurous dining experience in an ambience of decadent luxury. The menu optimises the use of the wood fire oven – sumptuous grills, delicious pizza’s and decadent pasta dishes are on offer. Outdoor catering has been perfected and dinners or small functions are provided on request.
T o u c h Spa is a unique spa experience. Take refuge from the stresses of modern day life at in a wonderfully tranquil environment, conducive to relaxation and indulgence. Our Mission: Going back to basics. If you feel good, you look good. So we take a holistic approach to health and beauty. Personal well-being has become a necessity, not a luxury, so slow down, think clearly and consider your whole being, which we believe is the key to good health. T o u c h Spa has an enticing menu for men and ladies, using the relaxing benefits of blissful treatments to leave you feeling fabulously indulged and totally de-stressed. Be good to yourself. You deserve it.