Analyst warns that foreign investor in SAA could destabilise industry

ANY FOREIGN airline investing in South African Airways could destabilise the relatively stable airline environment which currently prevails in this country, if it comes with an aggressive pricing strategy, says James Coghill of Deutchse Morgan Grenfell.
In an analysis the merchant bank, which is advising Airports Company of South Africa on privatisation, says that this is a material risk over the long term, but does not view it as a big risk for the next two years.
In his analysis Coghill says he thinks it unlikely that British Airways will take a stake in SAA, even though it has been monitoring SAA's privatisation with a particular interest in the international routes.
If it did so, he suggests that a conflict of interest might necessitate terminating BA's franchise agreement with Comair on regional flights..
This has been dispelled somewhat, however, by Piet van Hoven, Comair's m.d. who says he does not envisage any termination of the agreement which has worked well.
He says there are no plans for Comair to expand into the long-haul field as part of a rival group to SAA and whoever is to be its new strategic equity partner. Comair will confine expansion plans to the regional market, he said.
Air traffic volumes on domestic routes are expected to grow by at least 7% a year for the next four years, says Coghill. Traffic volumes flown by regional airlines have grown at almost twice that of international carriers during the past decade, he says.