Bloomberg News

Comair May Sell Some Planes as Airport Charges Increase

September 13, 2011

(Updates with executive’s comment from fifth paragraph)

Sept. 13 (Bloomberg) -- Comair Ltd., a South African air carrier partly owned by British Airways Plc, may sell some planes as a government plan to increase airport charges as much as 70 percent would make low-cost travel unaffordable, joint Chief Executive Officer Gidon Novick said.

“We will be reducing capacity because the market is going to shrink,” Novick said by phone from Johannesburg today. “The increase over five years will be 160 percent from the current price.”

Comair operates the Kulula.com low-cost airline brand as well as the British Airways franchise in southern Africa. The lowest fare of 300 rand ($41) will increase by 20 percent, which will all go toward covering airport taxes, he said.

The Airports Company South Africa (ACSA), the nation’s state-owned airports operator, will increase taxes at its facilities by 70 percent starting Oct. 1, according to the Government Gazette published on June 30. The government decides the rate of increases.

“That will make air travel unaffordable for the emerging market, those people who never used to fly before,” Novick said. The company will pass on the extra costs to travelers, he said.

1Time Holdings Ltd.’s cancellation of its route to Maputo, in neighboring Mozambique, from Johannesburg, was mainly because of the high airport taxes, Chief Executive Officer Glenn Orsmond said in a mobile-phone interview from Johannesburg today. The move was announced in August.

‘Unviable’ Route

“The airport charges of 520 rand one-way on the 45-minute flight were too expensive, made the route unviable,” Orsmond said. 1Time Airlines, the listed company’s low-cost airline, terminated the route after just under a year of operations.

“There is no link between the airport taxes to the services airlines receive, in the end we are subsidizing the retail monuments,” Orsmond said, referring to shopping centers in the airport.

In preparation for last year’s soccer world cup, ACSA spent 17 billion rand over three years, according to the company’s 2010 annual report.

Both 1Time and Comair serve the budget segment of the market, competing with the state-owned full-service carrier South African Airways and three other airlines.

“These high taxes will reduce the airline market and destroy jobs in the tourism sector,” said Orsmond. If the government wishes to create jobs, he said, it “must charge reasonable taxes and must be consistent.”

--Editor: James Langford

To contact the reporter on this story: Sikonathi Mantshantsha in Johannesburg at smantshantsh@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at Kwong11@bloomberg.net


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