1 00:00:00,120 --> 00:00:03,000 Speaker 1: There've been quite a few conversations on this radio station 2 00:00:03,080 --> 00:00:06,800 Speaker 1: over the past week about travel, particularly air travel, and 3 00:00:06,840 --> 00:00:10,800 Speaker 1: what's happening to travel. As the oil price continues to soar, 4 00:00:11,360 --> 00:00:14,240 Speaker 1: it may be becoming a lot more expensive for South 5 00:00:14,280 --> 00:00:18,079 Speaker 1: Africans and United Airlines CEO Scott Kirby has warned that 6 00:00:18,120 --> 00:00:21,000 Speaker 1: oil prices could hit one hundred and seventy five dollars 7 00:00:21,000 --> 00:00:23,639 Speaker 1: a barrel and remain above one hundred dollars a barrel 8 00:00:23,720 --> 00:00:26,000 Speaker 1: until the end of twenty twenty seven, that's the end 9 00:00:26,040 --> 00:00:29,080 Speaker 1: of next year. That kind of fuel spike doesn't just 10 00:00:29,120 --> 00:00:32,880 Speaker 1: affect international carriers. It ripples straight through to South African 11 00:00:32,920 --> 00:00:35,839 Speaker 1: airways and travelers trying to visit friends and relatives. And 12 00:00:35,880 --> 00:00:39,120 Speaker 1: I had experience of that myself over this past weekend 13 00:00:39,120 --> 00:00:41,920 Speaker 1: when I needed to book a return trip to Johannesburg 14 00:00:42,000 --> 00:00:46,400 Speaker 1: and it was over six thousand rand. I felt quite ill. 15 00:00:46,880 --> 00:00:49,080 Speaker 1: Joining me on the line to break down the implications 16 00:00:49,280 --> 00:00:52,240 Speaker 1: is aviation analyst with a deep insight into both global 17 00:00:52,240 --> 00:00:54,840 Speaker 1: and local airlines, Guy Leech, Guy, good afternoon, Thanks for 18 00:00:54,920 --> 00:00:55,880 Speaker 1: joining us. 19 00:00:56,160 --> 00:00:59,000 Speaker 2: No, I would be nice to be with you. Guy. 20 00:00:59,520 --> 00:01:01,400 Speaker 1: What does a fuel price of one hundred and seventy 21 00:01:01,480 --> 00:01:03,880 Speaker 1: five dollars a barrel mean in practical terms for South 22 00:01:03,880 --> 00:01:06,800 Speaker 1: African travelers, especially those wanting to go abroad. 23 00:01:07,240 --> 00:01:09,640 Speaker 2: Yeah, it's an absolute nightmare. You know. We do have 24 00:01:09,959 --> 00:01:12,520 Speaker 2: We've got use to fuel spikes in the past from 25 00:01:12,560 --> 00:01:15,120 Speaker 2: these sort of black swan events, but I think that 26 00:01:15,200 --> 00:01:18,040 Speaker 2: this time it will be even worse, particularly if Scott 27 00:01:18,120 --> 00:01:21,200 Speaker 2: Kirby's warnings hold any water, and I think they doue. 28 00:01:21,240 --> 00:01:23,959 Speaker 2: He does, after all, run the biggest airline in the world, 29 00:01:24,280 --> 00:01:28,280 Speaker 2: but quite strengthy. We've already seen the impact of the 30 00:01:29,080 --> 00:01:33,600 Speaker 2: post COVID recovery on South African travel in the sense 31 00:01:33,600 --> 00:01:36,119 Speaker 2: that we already we lost so many of the low 32 00:01:36,160 --> 00:01:39,199 Speaker 2: cost carriers. We lost Crudo, we lost Mango, we lost 33 00:01:39,200 --> 00:01:41,960 Speaker 2: British Airways, and of course we lost one time before 34 00:01:42,000 --> 00:01:45,360 Speaker 2: that all and not to mention Essay Express, and our 35 00:01:45,400 --> 00:01:48,280 Speaker 2: airline industry still has not recovered. And the reason for 36 00:01:48,360 --> 00:01:51,600 Speaker 2: that is because really a disposable income is just not 37 00:01:51,720 --> 00:01:53,960 Speaker 2: what it used to be, and people are not just 38 00:01:54,080 --> 00:01:57,640 Speaker 2: able to pick up the phone book tickets and you 39 00:01:57,920 --> 00:02:01,120 Speaker 2: go away for the weekend anymore. It's got that much 40 00:02:01,120 --> 00:02:03,600 Speaker 2: more expensive. So I think the prices are going to 41 00:02:03,640 --> 00:02:07,520 Speaker 2: continue to stay exorbitant, and it's really going to depress 42 00:02:07,520 --> 00:02:10,240 Speaker 2: the mind for what we could call discretionary travel. 43 00:02:10,520 --> 00:02:12,720 Speaker 1: Following on from what you've just said, then, guy, do 44 00:02:12,760 --> 00:02:14,800 Speaker 1: you think people will cut back or do you think 45 00:02:14,840 --> 00:02:17,440 Speaker 1: South Africans will continue traveling despite the costs. 46 00:02:18,000 --> 00:02:20,320 Speaker 2: Well, I think we need to differentiate the travelers or 47 00:02:20,440 --> 00:02:26,400 Speaker 2: market into the discretionary and business. Yeah, and that's pretty 48 00:02:26,480 --> 00:02:29,840 Speaker 2: much normally around fifty to fifty fifty percent of travelers 49 00:02:29,880 --> 00:02:34,520 Speaker 2: on business fifty percent discretionally. Business travel will also be 50 00:02:34,560 --> 00:02:38,880 Speaker 2: impacted because you people will go back to using or 51 00:02:39,160 --> 00:02:41,200 Speaker 2: rather choose to use, say a zoom or a team's 52 00:02:41,240 --> 00:02:43,679 Speaker 2: call rather than a face to face simply because of 53 00:02:43,720 --> 00:02:46,280 Speaker 2: the increased costs. But the real impact is going to 54 00:02:46,320 --> 00:02:49,280 Speaker 2: be on discretionary travel. As I said, you know, I 55 00:02:49,320 --> 00:02:51,799 Speaker 2: was looking at a British Airways flight to London the 56 00:02:51,880 --> 00:02:55,200 Speaker 2: other day and that was either fifty thousand round return. 57 00:02:55,639 --> 00:02:59,040 Speaker 2: Very few people are for one person obviously, that's that's 58 00:02:59,360 --> 00:03:01,160 Speaker 2: very few people are going to be able to afford 59 00:03:01,440 --> 00:03:04,680 Speaker 2: to supply their families at those sort of devices. So 60 00:03:05,040 --> 00:03:08,920 Speaker 2: I'm seeing a significant knock on effect fee for instance, 61 00:03:09,000 --> 00:03:12,440 Speaker 2: tourism and just the airline industry as a whole guy. 62 00:03:12,520 --> 00:03:15,880 Speaker 1: You mentioned the airlines that we've lost here in South Africa. 63 00:03:16,160 --> 00:03:19,000 Speaker 1: The SAA is still in the air, barely, but in 64 00:03:19,040 --> 00:03:22,280 Speaker 1: the air. It must be very difficult for a South 65 00:03:22,320 --> 00:03:25,280 Speaker 1: African airline when you're paying for fuel in dollars but 66 00:03:25,360 --> 00:03:26,280 Speaker 1: you're earning rounds. 67 00:03:27,360 --> 00:03:32,080 Speaker 2: That's if you're talking about SAA. That's particularly a problem 68 00:03:32,120 --> 00:03:35,440 Speaker 2: for SAA because traditionally good idea it was also a 69 00:03:35,480 --> 00:03:38,360 Speaker 2: long haul carrier, and that meant that it could sell 70 00:03:38,400 --> 00:03:40,880 Speaker 2: tickets in the United States or in the Europe or 71 00:03:40,880 --> 00:03:43,400 Speaker 2: whatever and get paid in hard currencies for that. But 72 00:03:43,720 --> 00:03:47,200 Speaker 2: it has been singlely slow or in its ability to 73 00:03:47,200 --> 00:03:50,440 Speaker 2: get back to long haul flights with only really Australia 74 00:03:50,520 --> 00:03:53,640 Speaker 2: and Brazil happening. So it's getting paid very little in 75 00:03:53,720 --> 00:03:56,880 Speaker 2: hard currency, and he needs to feed these roots from 76 00:03:56,880 --> 00:03:58,840 Speaker 2: the South. In other words, it needs to make them 77 00:03:58,840 --> 00:04:02,360 Speaker 2: affordable in rands. That means that although SAA has been 78 00:04:02,400 --> 00:04:07,000 Speaker 2: struggling along, you know, barely breaking even and running on 79 00:04:07,040 --> 00:04:09,680 Speaker 2: a very weak capital base, it's going to find its 80 00:04:09,720 --> 00:04:13,800 Speaker 2: balance sheet and income statement under any piecing pressure from this. Normally, 81 00:04:13,800 --> 00:04:17,520 Speaker 2: for an airline like fuel costs are around about twenty 82 00:04:17,520 --> 00:04:20,400 Speaker 2: five percent of a total costs well, as we can 83 00:04:20,440 --> 00:04:22,960 Speaker 2: see this is the fuel costs are have more than 84 00:04:23,000 --> 00:04:27,039 Speaker 2: doubled from seventy even less than seventy dollars a theayre 85 00:04:27,080 --> 00:04:29,600 Speaker 2: also over one hundred and over possibly one hundred and 86 00:04:29,640 --> 00:04:32,599 Speaker 2: seventy five ers we see, so that that would have 87 00:04:32,640 --> 00:04:35,719 Speaker 2: an enormous impact on SAA's bottom line and of course 88 00:04:35,760 --> 00:04:36,880 Speaker 2: the other airlines as well. 89 00:04:37,680 --> 00:04:41,440 Speaker 1: That's really going to leave international travel to only the 90 00:04:41,480 --> 00:04:43,880 Speaker 1: most elite of the elite here in this country. 91 00:04:43,920 --> 00:04:46,440 Speaker 2: Then I think that that statement is true. I think 92 00:04:46,440 --> 00:04:48,560 Speaker 2: that the tour of the industry is going to have 93 00:04:48,640 --> 00:04:50,880 Speaker 2: to place up to the fact that we're going to 94 00:04:50,920 --> 00:04:53,760 Speaker 2: have to do a lot more catering to our local 95 00:04:53,800 --> 00:04:59,039 Speaker 2: market and perhaps expect less from the foreign travel market. 96 00:04:59,080 --> 00:05:02,000 Speaker 2: And obviously are the big spenders so on worries about 97 00:05:02,040 --> 00:05:04,760 Speaker 2: obviously there's sort of the high end game, lodgers and 98 00:05:04,800 --> 00:05:06,839 Speaker 2: so on. But then at the same time I think 99 00:05:06,880 --> 00:05:10,160 Speaker 2: they could argue that, well, it's you really who are 100 00:05:10,240 --> 00:05:14,560 Speaker 2: less susceptible to high airline ticket prices. It's really the 101 00:05:14,600 --> 00:05:17,400 Speaker 2: middle class that that feels the use of these impact 102 00:05:17,480 --> 00:05:20,680 Speaker 2: the most. And it's really across Africa that the middle 103 00:05:20,680 --> 00:05:24,359 Speaker 2: class really has been the limiting factor in airline growth 104 00:05:24,360 --> 00:05:26,560 Speaker 2: because it's not as big as as one that's kind 105 00:05:26,560 --> 00:05:27,800 Speaker 2: of used to around Europe. 106 00:05:27,800 --> 00:05:31,599 Speaker 1: And put instance, the USA guy, is it legal for 107 00:05:31,760 --> 00:05:35,599 Speaker 1: airlines to slap searcharges on passengers when flights have already 108 00:05:35,600 --> 00:05:37,040 Speaker 1: been booked and paid for already. 109 00:05:38,480 --> 00:05:42,839 Speaker 2: I'm not aware of the airlines applying retroactive search charges. 110 00:05:43,279 --> 00:05:46,280 Speaker 2: Maybe wrong on that, but at my understanding is at 111 00:05:46,320 --> 00:05:48,560 Speaker 2: this stage, if you've booked and paid for your ticket, 112 00:05:48,600 --> 00:05:51,960 Speaker 2: that's the place you pay, and they're not. They're not, 113 00:05:52,400 --> 00:05:56,520 Speaker 2: as I said, opposing additional taxes on that. However, it 114 00:05:56,560 --> 00:05:59,440 Speaker 2: does mean that there'll be a big lag effeck. In 115 00:05:59,440 --> 00:06:01,680 Speaker 2: other words, yees, because they've got a whole lot of 116 00:06:01,720 --> 00:06:04,760 Speaker 2: people who've already booked and paid for the tickets. They're 117 00:06:04,800 --> 00:06:07,880 Speaker 2: going to have to recover that at increased tickets later 118 00:06:07,960 --> 00:06:10,720 Speaker 2: on and for longer for those who haven't yet paid 119 00:06:10,760 --> 00:06:11,719 Speaker 2: for their seats. 120 00:06:11,800 --> 00:06:15,720 Speaker 1: And if Scott Kirby is correct, which you say you 121 00:06:15,760 --> 00:06:19,120 Speaker 1: believe that he probably is, and if this continues until 122 00:06:19,120 --> 00:06:24,680 Speaker 1: the end of twenty twenty seven, will the travel and 123 00:06:24,880 --> 00:06:28,960 Speaker 1: aviation industry easily recover from such a long battle. 124 00:06:29,480 --> 00:06:31,760 Speaker 2: No, I think that's an excellent question. Only because the 125 00:06:31,800 --> 00:06:35,240 Speaker 2: answer is no for unusual reasons. The real reason I 126 00:06:35,240 --> 00:06:37,880 Speaker 2: would say no is because the entire airline industry is 127 00:06:37,920 --> 00:06:41,240 Speaker 2: constrained by another number of what you could call relatively 128 00:06:41,279 --> 00:06:45,880 Speaker 2: extraneous factors, one of which is a global airline pilot shortage. 129 00:06:46,080 --> 00:06:49,880 Speaker 2: Another is massive problems with supply chain. So if you 130 00:06:49,960 --> 00:06:52,400 Speaker 2: try to order a new airliner these days, like even 131 00:06:52,400 --> 00:06:56,520 Speaker 2: a blowing seventy seven or an airby Safety twenty, you've 132 00:06:56,560 --> 00:06:59,520 Speaker 2: got a waiting list of over seven years, and that 133 00:06:59,640 --> 00:07:04,160 Speaker 2: means that the industry is already high bound in terms 134 00:07:04,200 --> 00:07:07,840 Speaker 2: of its ability to recover. So I think that we're 135 00:07:07,880 --> 00:07:10,800 Speaker 2: going to see a lot of pressure on the airline industries. 136 00:07:11,200 --> 00:07:15,120 Speaker 2: On the airline industry, perhaps a whole lot more bankruptcies, 137 00:07:15,200 --> 00:07:18,720 Speaker 2: and the less seat supply there is, the more pressure 138 00:07:18,760 --> 00:07:21,480 Speaker 2: is on higher seat prices, as we've already seen in 139 00:07:21,520 --> 00:07:22,120 Speaker 2: South Africa. 140 00:07:22,560 --> 00:07:25,920 Speaker 1: Yeah, I mentioned at booking a flight to Johannesburg six 141 00:07:26,000 --> 00:07:29,280 Speaker 1: thousand round return. Is that going to be the new norm? Guy? Cool? 142 00:07:29,640 --> 00:07:31,840 Speaker 2: I hope not. I mean, I didn't think they were 143 00:07:31,840 --> 00:07:36,600 Speaker 2: that expensive, But it obviously all depends on the usual 144 00:07:36,640 --> 00:07:39,480 Speaker 2: factors in terms of dynamic pricing. How far ahead you 145 00:07:39,560 --> 00:07:42,240 Speaker 2: booked your ticket, and whether you're booking it on a 146 00:07:42,240 --> 00:07:46,200 Speaker 2: busy weekend. Maybe this was a busier weekend because there 147 00:07:46,240 --> 00:07:48,320 Speaker 2: was a public holiday, and all these sort of factors 148 00:07:48,640 --> 00:07:51,000 Speaker 2: you affect the prices. I haven't checked prices, but I 149 00:07:51,040 --> 00:07:53,640 Speaker 2: think you could still get a ticket price for probably 150 00:07:53,680 --> 00:07:56,160 Speaker 2: two two and a half thousand round the term. I'd 151 00:07:56,160 --> 00:07:58,360 Speaker 2: have to check that as. 152 00:07:58,200 --> 00:08:00,960 Speaker 1: Always, Guy, thank you very much for your time. Aviation 153 00:08:01,200 --> 00:08:05,119 Speaker 1: analyst and respected individual in the aviation industry, Guy Leach 154 00:08:05,240 --> 00:08:09,119 Speaker 1: talking to us about fuel price hikes and what that's 155 00:08:09,160 --> 00:08:10,200 Speaker 1: doing to air travel.