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Tanzania’s new low-cost carrier FastJet could come under criticism for too low fares

Dec 07, 2012 5:20 am

Skift Take

FastJet has the smarts of easyJet players behind the scenes, but it will need to watch out for the machinations of its East African competitors who enjoy higher fares and less-reliable service.

— Jason Clampet

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The country’s air fares are fully liberalized for all air operators, both conventional and low cost carriers, but fare undercutting is not allowed.

However, undercutting is possible when the fares are introductory, the Tanzania Civil Aviation Authority (TCAA) has said. According to Tanzania Civil Aviation Authority (TCAA), it is the Fair Competition Commission (FCC) that has the authority to intervene in cases where undercutting is deemed unfair.

The TCAA said in Dar es Salaam that there is nothing wrong with the new entrant in the local aviation industry, FastJet, who charge low fares as their operation mode is quite different from that of traditional service providers. FastJet capitalizes on economies of scale, due to low costs per seat, as a result of high load factors.

TCAA Director General Fadhili J. Manongi said that budget airlines make their day by playing with the number of passengers carried due to low fixed costs per passenger, thus are able to charge reasonably low fares. “For low cost airlines, yields per passengers are relatively (small due to low fares), compared to traditional airlines (which have high yields per passenger), due to high fares, but they maximize revenues from the larger number of passengers,” Mr Manongi said.

Further, the services offered are different from the traditional ones. If they have to be offered one has to meet fare requirements and pay for baggage and refreshments on board, among others. In the traditional business model, these costs are inclusive in the fare.

According to FastJet website, passengers are required to part with 40,000/- in case a change of departure date is necessary. The airline operates two Air Bus 319s with capacity to carry 150 passengers. Other charges include a 100-per cent penalty on no show and cancellation of the safari.

This means a passenger needs to repurchase a ticket once he or she fails to report at the airport. “In the event of cancellation FastJet will not compensate you (customer) further than a full refund (claimed by writing)…or rebook an alternative date without additional fees,” the airline’s info on website shows.

The TCAA boss said that conventional airlines concentrate on high yield per passenger by offering luxurious services from checking in to take off and eventually, to landing. “The good thing is that both budget airlines will continue to operate in the same skies as their conventional counterparts,” the DG said.

The University of Dar es Salaam Senior Lecturer (Economics), Dr Haji Semboja said that the fares offered by FastJet are too low to be realistic for sustainable operations. “I am not conversant with aviation business but the fares are too low to provide quality services. May be they are for promotion basis,” Dr Semboja told the ‘Daily News.’

FastJet has said it would break the tradition that those who fly are the elite or special groups in the society. The airline wants to make everyone able to fly at affordable costs. Its fares start from as low as 32,000/- excluding taxes and fees to over 200,000/-.

The earlier the booking the better the fare one gets. On Tuesday, the airline completed its first weekend of operations, with all departures on schedule. The airline operated two trips a day each from Dar es Salaam to Mwanza and Kilimanjaro.

© 2012 AllAfrica Global Media. Provided by Syndigate.info an Albawaba.com company. 

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