Low-cost airlines rush to enter business class segment as SAA nears take-off

The three operating low-cost airlines in the country – FlySafair, Kulula and Lift – have all launched ‘business class’ or premium offerings in an effort to compete against SAA.

The former wholly-state-owned airline plans to resume flights on September 23, while full-service domestic rival British Airways (operated by Comair) restarted operations on Wednesday (September 1).

FlySafair

FlySafair introduced Business Class in August last year as a replacement for its Premium fare. Beyond the two checked bag and 32kg special equipment allowance, it included priority bag as well as a blocked middle seat between passengers. This blocked seat can be added on any of its other fare classes (Lite or Standard) at a cost of R750. This is the difference between its Standard and Business Class fares, meaning the special equipment allowance, priority bag, included seat reservation and unlimited fee-free changes are effectively bundled for ‘free’.

Kulula

Kulula overhauled its fare structure last week ahead of it resuming operations on Wednesday. Previously it had a standard fare, a semi-flex fare and a full-flex option. It now offers three options: Fly Light, Pack & Go and Fully Loaded. This repackaging of its fares has achieved two things: it can compete more effectively with FlySafair at the low-end where a traveller does not require a checked in bag and, more importantly, it effectively raises the price of its standard fares by R195. Kulula bundles two free flight changes into this ‘Pack & Go’ option where customers will pay only the fare difference. This is its answer to rival Lift’s flexible fare policy. Kulula’s highest tier fare is not strictly comparable to a premium or business class offering, as it includes two checked bags, Q-jump and free unlimited flight changes (with the fare difference payable). There is no blocked off middle seat. Kulula cannot realistically compete in the business class space as its sister-airline, BA, plays in that segment.

Lift

This week, Lift unveiled its business class offering, Lift Premium which offers what it claims is “industry-leading legroom”‚ unlimited flight changes as well as priority customer support. The fare bundles two checked bags as well as a sports equipment allowance. Flights can be changed or cancelled up to one hour before departure without any penalties. In these Premium zones onboard its Airbus A320s, the middle seat has been converted into an additional tray table. Flights offering Premium seating start on October 11.

The space to watch

The real competition will be on the Johannesburg-Cape Town route, which remains one of the busiest domestic routes in the world. As the economy continues to open up following the peak of the Covid-19 third wave, travel will continue to increase. Following SAA’s grounding, the only domestic business class experience (particularly when it comes to the amount of space) is on British Airways.

It is therefore no surprise that the low-cost carriers have decided to compete in this segment, as operating margins on these seats are far higher than on others.

These seats are sometimes also the last available on flights meaning that airlines are able to get travellers to pay a multiple more than they ordinarily would (also at a higher margin).

Moneyweb compared fare prices on flights between Johannesburg (OR Tambo International) and Cape Town International Airport for a random Monday in October.

* Cheapest flight departing from the respective airport between 6am and 8am.

** Not a true business class offering as the Fully Loaded fare only includes a single seat (no blocked-off seat).

Because of what could only be suspected limited demand, SAA’s pricing is not that dynamic (yet). At this stage, BA’s economy class and business class fares compare very favourably against the flag-carrier.

Interestingly, Lift Premium is very aggressively priced against business class fares for the full-service carriers, at around 30% cheaper. FlySafair, with an experience with arguably fewer bells-and-whistles, is around half the price of BA’s business class.

Once travel picks up from these fairly-depressed levels, it will be interesting to see just how aggressively the low-cost and full-service carriers (presuming SAA actually restarts?) compete for those travellers willing to pay more for a premium experience.

Listen as SAA interim CEO Thomas Kgokolo chats to Fifi Peters (or read the transcript here):