Venter flying high as court battle looms

The challenges of the airline business anywhere in the world are harsh. In South Africa they are merely amplified by a grotesquely uneven playing field.

"People ask me why I stick it out," says Venter. "That's the appeal of it; the adrenaline rush of not knowing what's coming next," he says.

Taking SAA to court over its R5bn bailout from government may prove to be the biggest rush of all. Comair's position is that SAA has been repeatedly bailed out by the government to the tune of billions since 1991, a practice that makes it impossible for private carriers to compete on an equal footing.

It is a brave act on Comair's part but will it be money well spent, especially when the world's airlines are struggling in the wake of grinding economic turmoil?

"I think it's critical to the sustainability of the private airline sector," says Venter. "We could not spend the money and hope that in future SAA's behaviour is rational and allows the private sector to survive, or we could spend this money to sort out the private sector once and for all," he says.

If nothing else, the court bid will show Comair and everybody else exactly where they stand in relation to the government.

Legal action

At the core of Comair's legal action are the ideals of 1991, when the local aviation sector was deregulated. "A lot of policy was created to promote private participation in the industry," says Venter. That policy also included measures, but not laws, to prevent SAA from stifling competition.

Venter never intended to get into the airline business. Born in Grahamstown, he grew up in Cape Town where he graduated with a B Com degree.

"As a kid I was always interested in aircraft but I never contemplated the idea of going into the aviation industry," he notes.

The Comair job came out of the blue. His father told him there was a job there so he applied for it.

In 1996, the year Venter joined the airline, Comair was one of the better-run airlines in South Africa. Founded in 1943 by a trio of SAAF pilots, it grew from a charter outfit with a single aircraft into a local heavyweight, hauling passengers and freight on routes that other operators could not make pay or did not want.

By 1992, Comair was operating on domestic routes with a handful of elderly and thirsty, but cheap to buy, Boeing 737-200s, which in those heady days before oil went stratospheric were the minibus taxis of the airline business.

In 1996, Comair signed a franchise agreement with British Airways. A JSE listing followed two years later. But it was the launch of kulula.com - its low-cost arm whose model owed much to US no-frills standard bearer Southwest Airlines - in 2001 that really brought Comair into South African homes.

Anyone can fly

"Now anyone can fly," said the airline's ads, and they meant it. Fares, like its shiny green Boeing 727s that rattled windows and scared the hadedahs as they climbed out over Joburg, were dirt cheap, and, for a brief happy moment, it was almost cheaper to fly from Johannesburg to Cape Town than take the bus.

"Still," says Venter, "the airline was glad to see the back of the old gas-guzzlers.

"In those days we didn't have to worry about it as the fuel price was so low that if you could save money on the purchase price of the aircraft it was fine. The whole equation has changed now," he says.

With fuel accounting for a third of airline running costs, the oil price is now a key factor. Those carriers that prosper will likely have fleets of fuel-efficient aircraft such as the four Boeing 787-800s that Comair has just bought for kulula.com at roughly US$46m each.

"We're sitting at the highest fuel price in history," says Venter. "We don't expect it to make a significant pull-back to the old levels of US$40 a barrel. This is the new reality," he adds.

By upgrading the fleet, Venter estimates that fuel consumption has dropped about 27% per seat since 2005.

"If we were sitting with the same aircraft that we had in 2005 and we had a 27% increase in fuel consumption, we'd be out of business by now," he says.

The fleet upgrade is expensive but may yet pay off. Two decades after deregulation, Comair is the only survivor out of nearly a dozen start-up airlines whose wings have since been clipped.

The next challenge is to expand its routes and make them pay. Kulula.com has picked up East London, a route where margins appear to be paper thin, and will restart flights to Maputo in May.

The airline is looking at other opportunities in Mozambique and other SADC countries, but Venter adds a note of caution to the bubbling optimism about Africa's prospects.

"The challenge in Africa is that potential growth in percentage terms looks impressive, but when you look at it in absolute numbers it's still very, very small," he adds.

Source: Business Times via I-Net Bridge