August 30, 2004
Kulula.com, one of three budget airlines operating in South Africa, is now amongst the country’s top online retailers – and may be the biggest.
According to BA-Comair’s no-frills carrier, 65% of its passengers use the Internet to book their tickets – with a R25 reduction in ticket price for doing so.
“We have available 1.2-million seats a year and we will sell over a million of them,” says Gidon Novick, executive director of the airline.
Kulula.com started three years ago with one plane servicing one route and has grown to a five plane company servicing five routes and offering taxis, car hire and hotel bookings. 40% of its customers travel on business.
Besides the cost savings, transacting online is more convenient. Even in the first three months of operation, more than half of kulula.com’s bookings were made directly over the net.
“People love booking on line”, says Novick. “The airline does offer other ways to buy tickets, but then it expects its passengers to pick up the fee for the higher transaction costs involved.”
Low-cost carriers in demand
Low-cost carriers have flourished in developed markets where population densities are high, and there are several examples of successful ventures in Africa.
The most recent player to taxi onto South Africa’s runways is Civair, which intends to offer low-budget flights direct from the UK to Cape Town and Durban later in 2004. A return ticket from Durban to the UK is expected to cost about R3 000.
Locally, kulula.com is already being challenged by another new entry in the market, 1Time. 1Time aims to offer three domestic flights a day between Johannesburg and Cape Town.
The increased competition has been great for the consumer, sparking something of a price war between the new market entrants.
Kulula.com recently announced that it had slashed fares to Cape Town, Port Elizabeth, George and Durban by up to 30%, with one-way tickets going for as little as R199 (previously the tickets ranged from R400 to R900). 1Time countered by offering a guaranteed maximum fare of R581 or less on one-way journeys between Johannesburg and Cape Town.
Kulula.com was the first successful e-business take-off in South Africa since the hi-tech meltdown in late 2000.
The innovative airline was intent on turning more people into air passengers. However, in the process, it was turning more South Africans into online customers.
BA-Comair executives insisted on simplicity. The no-frills marketing promise had to be echoed in system design and the user interface.
The system behind the savings was built locally – with the help of Microsoft South Africa. There were several global distribution systems in place, but those systems can be huge, complex and unwieldy.
Mark Berman, principal technology specialist at Microsoft SA, calls it “a highly customized solution,” which has allowed the airline to drive its transaction costs down to near zero.
He says the success of a solution like kulula.com proves the value of partnering teams with appropriate competencies. In technology terms, he says, “familiarity does not breed contempt, it breeds optimum solutions.”
Source: Adapted from Proudly South African.