"In South Africa the company is the biggest online retailer in the market. Gidon attributes Kulula's success to a combination of low prices and the ease of booking on the internet." Moneyweb

Kulula.com captures 20% of airline market

By Chris Nthite
Moneyweb
September 21, 2004

If growth in the European low-cost airline market is anything to go by, similar operators in South Africa could give the bigger players a run for their money.

According to the Financial Times, Wolfang Kurt, president of European Low Fares Airlines Association,expects no-frills operators to carry as many as 80-m passengers in Europe in 2004 — up from 47-m last year. He added that a growth rate of 40% in passenger volumes was expected to continue for at least another two years.

Europe's 67 low cost carriers are now expected to capture 18% of the market on intra-European routes, resulting in predictions that they could provide some strong competition to traditional network airlines.

On the South African front, low cost airlines — Kulula.com and One Time — are also having a good time. Gidon Novick, executive director of Kulula, has disclosed that, two years after the airline entered the local market, it has managed to capture 20% market share. He added that together the two no-frills operators control about 25% of the market.

Compared to the European figures, Kulula's roughly 1,2-m passengers a year is tiny, but in South Africa the company is the biggest online retailer in the market. Gidon attributes Kulula's success to a combination of low prices — which he says are 40% lower than traditional airlines — and the ease of booking on the internet. He adds that the high frequency of flights, including 12 flights a day between Johannesburg and Cape Town (more than that on offer from other local operators), also gives Kulula a competitive advantage.

Gidon says Kulula does not see One Time as a competitor, but that instead the focus is on the whole market. He reckons that Kulula will provide South African Airways with stiff competition in the medium to long-term. He believes Kulula has shown its ability to capture a large portion of the market, given that since its entry into the local airline business, it has seen the total number of people making use of airline travel grow by 30%.

Attempts to get comment from One Time were unsuccessful.

Source: Moneyweb

Comair Profit Surges for Year

By Carli Lourens, Trade and Industry Editor
Business Day, Johannesburg
September 8, 2004

Aviation group Comair, which owns British Airways in SA and budget airline kulula.com, reported a 250% surge in operating profit for the year to June yesterday, but its attributable loss more than tripled to R96,7m.

The loss was largely due to a revaluation of the group's fleet against rand appreciation, leading to an impairment charge of R115m.

Comair, whose headline earnings almost doubled to 12c a share, was pleased with its performance in what it described as a year of unprecedented competition. The year was characterised by overcapacity and aggressive pricing, it said.

Comair MD Pieter van Hoven said the number of passengers carried by the group's two airlines grew 31% to 2,2-million and capacity increased 19% in the year.

Both British Airways and kulula.com achieved growth in market share, he said.

This was despite the entry of 1Time as a rival to low-fare airline kulula.com. Van Hoven said 1Time's entry in the domestic market, launched in March, had not hurt kulula.com.

Instead, pricing pressure came mainly from state-owned South African Airways, which dropped prices in an attempt to compete with kulula.com, said Van Hoven.

Aggressive pricing saw a significant decline in yields, but the increase in the number of seats sold helped Comair post an 8% rise in revenue to R1,47bn over the previous financial year.

The jump in operating profit to R40,7m was helped by the stronger rand's reduction of operating costs in the second half of the year.

The rand benefit was partially offset by an increase in the dollar price of fuel over the same period and lower rand yields from foreign currency sales, the group said.

Comair also said it might have to increase the $6 fuel surcharge on British Airways ticket sales by about 12%. Fuel accounted for 25% of Comair's costs.

Kulula.com tickets did not carry a surcharge. Van Hoven said none of the low-fare airlines that Comair monitored in other countries had implemented a surcharge.

Van Hoven said cash generated by operations remained strong, resulting in a cash balance of R210m at year end. Part of this would be used to replace older aircraft.

Comair does not provide separate figures for British Airways and kulula.com.

Van Hoven last night said in due course it would have to start doing this. The group expected "reasonable prospects for a further improvement in operating profit for the 2005 financial year".

Comair closed 3c higher at 85c on the JSE Securities Exchange SA.

Source: Business Day