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SAA

New CEO for SAA – what travel agents need to know

SAA has appointed Vodacom group executive, Vuyani Jarana, as its new CEO. He will commence his duties after his current employer has officially released him.

Jarana is currently Chief Officer for Vodacom Business at Vodacom Group LTD, a position he has held since 2012. He is also a member of the core leadership team of Vodacom Group responsible for the enterprise segment across the continent.

Finance Minister Malusi Gigaba said: “Given that Jarana has turned around a loss-making subsidiary of the Vodacom Group, Vodacom Business Africa, into profitable and growth business, we believe he will be key in turning around SAA.”

What will the job of the new CEO be?

Jarana will have to slash costs, boost revenue and re-engineer the airline. He will also be implementing a long-term turnaround strategy and corporate plan which he did not formulate.

Jarana’s appointment will bring much needed stability to the executive management of the airline which has been without a permanent CEO since the departure of Monwabisi Kalawe in 2014.

What’s happening with SAA’s loan repayments? 

Gigaba is leading negotiations with SAA lenders in an attempt to postpone the repayment of loans due in September. SAA had to find an additional R6.9bn to settle these loans. The loans were due for settlement in July‚ but the airline managed to convince most of the lenders to defer the payment to end September.

How much money does the airline still need from government?

In addition to the R2.2bn bail-out, SAA told the Treasury it needed R13bn over the next three years, of which R3bn will be used for working capital and R9.1bn to retire the debt that is maturing in the current financial year.

Will the government grant SAA another bailout?

Minister Gigaba will make an announcement on a bail-out in the medium-term budget review in October. Gigaba said strict conditions would be attached to the recapitalisation of the airline.

Will SAA need to cut routes?

One of the measures to cut costs at SAA is to cease operations on unprofitable routes, including the Johannesburg-Abuja route.

Briefing Parliament’s Standing Committee on Finance on August 4, SAA acting ceo, Musa Zwane, said he expects to save R900m per annum by cutting a number of routes.

What’s happening with the Preferential Procurement Regulations?

Other than the appointment of an SAA CEO, Gigaba had also undertaken to meet the deadlines set on National Treasury in the 14-point Action Plan released in July, including the implementation of the Preferential Procurement Regulations.

Implementation of the Preferential Procurement Regulations commenced on 1 April 2017 and the reference to July 2017 is linked to accelerating efforts towards inclusive growth – preferential procurement regulations are one of the policy instruments to accelerate the inclusive economic activity.

child-holiday

Air travel to become more child-friendly

On July 13, the US passed a Bill (The Federal Aviation Administration Reauthorisation Bill) that is expected to greatly improve family travel.

With the transition to new airline policies offering premium seats and boarding options for a fee, families are often facing anxiety-inducing challenges and choices. Parents are forced to pay additional fees when checking in to their flight just to ensure they can sit next to their small children on the plane. In many cases, parents must disrupt the boarding process to ask willing passengers to change their seats, despite the fact that these individuals may have already paid additional fees for seats themselves.

US Congressman Jerrold Nadler said in a statement that this Bill, dubbed the ‘Families Flying Together’ Bill, puts an end to the ‘absurdity’ of toddlers sitting separate or unattended on an airplane – requiring airlines to plan ahead so that families with young children under 13 can fly together. It also allows pregnant women to pre-board their flights.

U.S. Senator Michael Bennet, who drafted the family-friendly amendment to the Bill, added: “Parents shouldn’t have to pay extra to sit with their kids on a flight. Separating them is not safe and often leaves them at the mercy of other passengers who must decide whether to trade seats. Separating young kids from their parents during the screening process can be just as traumatic, and the TSA shouldn’t be allowed to do it. Our amendment puts in place commonsense protections that will reduce the extra and unnecessary stress applied to families and pregnant women traveling by air.”

It seems that airlines have taken note of the new regulations. According to an article in the APEX Daily, several airlines have started already introducing changes.

Denver-based Frontier Airlines added a Kid Zone to the rear of its aircraft the day after the FAA Reauthorisation Bill was passed. Families travelling together can book a middle seat for free, while window and aisle seats are available at a minimal charge.

BA re-launched its Kids Fly for Free offer, which allow children under 12 to fly for free with every adult ticket purchased on selected routes.

Ryanair is not as forthcoming, and gives consideration to those passengers who have pre-booked seats. Starting September, the airline will require adults travelling with children under 12 to buy one reserved seat. The child’s reserved seat will be free, as will the seat for an additional accompanying adult.

Families on long-haul flights with Air New Zealand can stretch out and get comfortable by booking an Economy Skycouch, a three-seat row that can be configured into a flat space using footrests that move into a horizontal position.

In South Africa, kulula.com rewards children under 12 with a kiddies certificate, whereas parents flying with Mango can purchase an entertainment pack for their children.

Comair and UASA reach settlement after weeklong strike

Comair has confirmed that the current industrial action by members, represented by UASA, has come to an end. An amicable resolution has been reached between UASA the Union, representing airport staff and the company.

Over the weekend, Comair implemented a defensive lock-out of its airport staff, who have been on strike since Wednesday, 13 April 2016. The lock-out was effective Sunday, 17 April 2016. On Monday, 18 April 2016, UASA the Union approached the South African Commission for Conciliation Mediation and Arbitration (CCMA) for an urgent Section 150 intervention.

Both parties were open to resolve the dispute and on Tuesday, 19 April 2016, the parties agreed to a wage increase of 10% in 2016, 7% in 2017 and 6% in 2018, a total of 23% over the three year period, effective 01 January 2016.

Airport ground staff are expected to report for duty on Thursday, 21 April 2016.

The trade union, which has a 58% membership in the airport unit, initially requested a 35% increase over 3 years, while Comair was offering an unconditional 7.5% increase for each of the three years (22,5% over three year period).

Domestic airfares to go up?

As ASATA has signed a formal agreement with SA Tourism to promote domestic tourism in South Africa, reports suggest that domestic airfares will skyrocket during the coming few months.

TIR reported this month that domestic suppliers have implemented significant rate increases, rendering domestic travel almost more expensive than international travel. eTNW has also predicted that airfares will increase from April 1.

Spokesperson for LCC Mango Hein Kaiser explains that the increases in airfares could likely be a latent impact of the significant weakening of the Rand. But, he was quick to point out that Mango’s fares have been consistent over this time period with peak and demand fares stable.

Said Kaiser: “Air fares and fare levels are governed by input costs which, again, are highly dependent on exchange rates. The bulk of an airline’s input costs are priced in foreign currency and, as such, with a weakened Rand, makes air travel particularly vulnerable.”

Shaun Pozyn, Head of Marketing: British Airways and kulula.com, said airlines would not be hiking their fares, despite increased demand during school holidays and long weekends.

Pozyn explains: “We are operating in a very highly competitive environment, which is currently displaying low growth and market demand with too much excess capacity on some of the routes. Owing to this, kulula.com has not increased nor will we be increasing our fares in the near future. kulula will continue to focus on efficiencies to ensure that we operate a sustainable business in the current market conditions.”

According to Kirby Gordon, Vice President: Sales and Distribution for Safair Operations, Safair prices its fares on a demand curve basis. “The first fare always goes for the best price, and then as the aircraft fills up, the seats become incrementally more expensive,” he explains, adding that during peak season, the aircraft fills up quickly, so those last fares reach their highest levels. “The most expensive fare on a half full flight might be R1000, while on a full flight it could be R2000.”

Says Gordon: “Late March and early April have proved to be incredibly high demand periods and we’ve been pleasantly surprised to see the number of people who appear to be taking advantage of the opportunity to fly over the holiday period – especially considering the state of the local economy.”

Gordon adds that airlines traditionally adjust their pricing in early April in accordance with the IATA season, usually aiming to go into winter at a slightly higher price point, because demand is low and so airlines need to charge slightly more for the tickets to cover the costs of less than full aircraft. However, he points out that Safair has not not adjusted its fares much, with the cheapest flights still selling at R499.

However, Gordon predicts there will eventually be a rise in the price of airfares, as much as there will also be a rise in the general cost of living. He says: “Economists are predicting a fairly heavy inflationary period driven by the currency, with interest rates and the cost of basic living driving inflation up to between 5% and 10%. Unfortunately, we are also heavily exposed to these factors (particularly the currency and the oil price) and so I believe it’s fare to assume that air fares will also rise to a similar quantum.”

 

 

 

ASATA ‘disappointed’ at AF KLM comm revision

Air France KLM has revised its trade commission structure effective December 1.

ASATA has noted with disappointment the decision and announcement by Air France KLM to revise its trade commission structure effective December 1, but must reiterate that it is not ASATA’s mandate to get involved in commercial agreements between travel agents and airlines.

ASATA’s mandate is influenced by the Competition Act that states that an association is, by nature, a group of competitors joined together for a common business purpose, an association satisfies what would ordinarily be a difficult element in proving an anticompetitive violation.

As such, any association activity that arguably could be perceived as being anticompetitive exposes ASATA and its members to the risks and consequences of the Competition Act and its watchdog, the Competition Commission.

Historically, the most significant area of antitrust concern for associations has been price fixing. Price fixing is a very broad term that includes any concerted effort or action that has an effect on prices, terms or conditions of trade, or on competitors. Accordingly, ASATA and its members should refrain from any discussion that may provide the basis for an inference that they agreed to take any action relating to prices, services, production, allocation of markets or any other matter having a market effect.

The decision by AF/KL also falls within the following Resolutions and cannot be challenged:

IATA Resolution 824 stipulates:

9. REMUNERATION

for the sale of air transportation and ancillary services by the Agent under this Agreement the Carrier shall remunerate the Agent in a manner and amount as may be stated from time to time and communicated to the Agent by the Carrier. Such remuneration shall constitute full compensation for the services rendered to the Carrier.

Further:

RESOLUTION 824a

APPLICATION OF THE TERM ‘COMMISSION’

PAC1(29)824a(except USA) Expiry: Indefinite PAC2(29)824a Type: B PAC3(29)824a

RESOLVED that, for the purpose of the Passenger Agency Conference Resolutions, where applicable, the term “commission” shall be deemed to include any form of remuneration.

Despite this, it is with anger and disappointment that our members took note of the recent announcement.

In a market where travel agents deliver around 80% of all airline sales, it is astounding that airlines still do not appreciate and reward this effective distribution channel. In no other industry are the biggest sales channels shown this level of disdain for their efforts.

To add insult to injury, this announcement comes off the back of a massive strike action in which the same travel agents stepped in to assist thousands of affected Air France passengers, at no cost to the airline.

The courtesy of engaging with the travel agent representative body prior to choosing to implement a change of policy of this nature would have also been highly appreciated.

We congratulate those airline that continue to show support to the travel agency sector; respect and value the role that travel agents play and reward them in a manner that is appropriate to the efforts.

Finally, ASATA will be looking specifically at the impact of actions like these on its members and assess future scenarios so that members are equipped to review their current business models and prepare for changes in the industry.