Local airlines have an eagle eye on the rand
Will downgrades lead to hike in air fares?
SA airline companies are keeping a close watch on the strength of the currency as well as other factors such as traveller numbers and the possibility of a steady rise in the oil price
SA airlines expect the economic fallout from the series of sovereign ratings downgrades will put pressure on them to hike air fares in 2017. But they are adopting a wait-and-see approach — uncertain what will happen to the rand, which has remained surprisingly resilient after the downgrades.The impact of higher dollar-based costs of leasing aircraft due to rand weakness, higher fuel costs and low domestic demand will cause costs to rocket. It could push airlines to raise prices despite a saturated market and intense competition.SA Airways (SAA) will feel the heat the most, despite the prospect of a boost from international tourists. Other domestic carriers say they will need to gauge market shifts, but expect operational costs to increase.The Reserve Bank said in its financial stability review in April that a decline in the rand had been softened by soaring interest in emerging market bonds. But further downgrades could put SA’s inclusion on key global bond indices at risk.Chris Zwe...
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