FINAL STRATEGY REPORT

KwaZulu-Natal Aviation & Charter Study Final Strategy Report

November 2002 Page 1

KWAZULU-NATAL AVIATION & CHARTER STUDY

FINAL STRATEGY REPORT

Introduction The KwaZulu-Natal Aviation and Charter Steering Committee (“The Client”) identified

the need to develop:

1. A comprehensive understanding of the current situation with regard to the

aviation and charter industry in South Africa, and KwaZulu-Natal in particular.

2. A comprehensive understanding of international aviation industry strategies

and policies that have impacted or may impact, on South Africa’s aviation and

tourism industries.

3. Recommendations and goals for the implementation of a focussed strategy

aimed at working through the positive and negative influences of the

provincial, national and international aviation industries, thereby creating a

framework for the aviation and charter industries to work together in

enhancing the tourism industry in KwaZulu-Natal.

Grant Thornton Kessel Feinstein was commissioned to carry out the KwaZulu-Natal

Aviation and Charter Study (“The Study”), which addresses the above listed needs.

The first two needs as identified by the Client is essentially a status-quo report on the

current situation in the South African, KwaZulu-Natal and international aviation

industries, and is dealt with in the Status Quo Report, submitted on 26 July 2002. Item

number three is contained in this document, the Strategy Report.

Contents of the

Strategy Report

This report comprise the following components:

A. The KwaZulu-Natal Aviation and Charter SWOT Analysis B. Strategy Formulation Fundamentals C. The KwaZulu-Natal Aviation and Charter Strategy at a Glance D. KwaZulu-Natal Aviation-Specific Strategy Recommendations:

1. International scheduled airline strategy 2. Domestic scheduled and charter airlines strategy 3. International Charter Airline Strategy

E. KwaZulu-Natal Tourism Strategy Recommendations in Support of Aviation

Strategies F. General Aviation Support Strategy Recommendations G. Summary of Strategy Initiatives H. Aviation Demand Projections I. The Marketing Collaboration Fund Strategy Initiative Elaborated J. The DIA Runway Extension Strategy Initiative Elaborated



A. The KwaZulu-

Natal Aviation &

Charter SWOT

Analysis

The KwaZulu-Natal Aviation and Charter SWOT (“Strengths, Weaknesses,

Opportunities & Threats”) Analysis was developed during a one day workshop,

facilitated by Grant Thornton Kessel Feinstein and attended by members of the

KwaZulu-Natal Aviation and Charter Steering Committee. The Status Quo Report was

used as the discussion document for the workshop.

Table 1 provides a prioritised and reworded adaptation of the SWOT Analysis. Please

note that this SWOT analysis is by no means exhaustive, but merely lists and

prioritises the most important strengths, weaknesses, opportunities and threats as

expressed by the Client.

Also note that this analysis is carried out from an aviation perspective and not from a

tourism perspective, although some overlap may occur.

Table 1: KwaZulu-Natal Aviation and Charter SWOT Analysis

Strengths: Weaknesses:

1. DIA has international status

2. DIA has a proven track record iro domestic and international flights and has had charter traffic

3. KwaZulu-Natal has a respectable existing

tourism product base

4. KwaZulu-Natal is known for tourism marketing

excellence

5. Good infrastructure at DIA in respect of extent and standard of infrastructure (new flexible design is unique in SA and globally)

6. Existing intra-provincial cooperation on aviation matters - within the province and the City of Durban – the desire to work together is in place

7. Durban has a good location in respect of

domestic routes

8. Competitive airport tariffs

9. First-rate aviation management and human

resources at DIA

10. South Africa has a good air traffic safety

record

11. In addition to DIA, KwaZulu-Natal has a range

of good standard smaller support airports

1. Limited airlines currently operating services to

DIA, in particular international tails are limited

2. Weak business climate in KwaZulu-Natal for

aviation industry – lack of enough and correct type of passenger demand

3. Lack of charter operations in/to KwaZulu-Natal and southern Africa

4. Currently the terminal infrastructure and other

infrastructure at DIA is out of balance (DIA

lacks other infrastructure, ie parking, runway length, etc)

5. Lack of national support for and understanding of KwaZulu-Natal aviation requirements

6. Lack of funding for aviation and charter development, particularly marketing funding

7. Although there is an intra-provincial desire to

cooperate on aviation matters, there is a lack

of common framework or vision for aviation

matters within the Province

8. KwaZulu-Natal lacks a formal provincial

aviation awareness campaign

Opportunities:

1. Develop and implement a domestic and international scheduled strategy for DIA:

Further development of Kulula services

Special packages to make use of low utilised domestic off-peak services

Arrangements with international scheduled airlines:

Block-buy seats and incorporate into package tours

Pursue Tag and Cabotage possibilities



2. Develop & implement an international and domestic charter strategy for DIA:

Pursue local charter airlines for KwaZulu-Natal sub-airports

Pursue large international event charters

Target charter operations for routes that carry no scheduled traffic (ie Eastern Europe)

Target smaller charter/tour companies (with potentially smaller aircraft that can land on current runway)

Pursue seat-only charters

3. Establish dedicated aviation development capacity – probably within Tourism KwaZulu-Natal – to drive the implementation of the aviation strategy

4. Develop a coordinated lobbying plan (lobby all key stakeholders and make use of all available processes)

5. Pursue opportunities to be generated from existing tourism industry relationships – tour operators

6. Develop a coordinated strategy to pursue tour operators that have shown interest & the European mega operators

7. Improve product packaging and re-package tourism product to enable KZN to target relevant new markets and also increase demand from current markets

8. Create linkages with other destinations (within SA – Cape Town, Gauteng, Kruger National Park – outside SA – Mombassa, Mauritius, Vic Falls) in order to strengthen market opportunities

9. Pursue market opportunities emanating from the expected growth in traffic from Africa

10. Position DIA as the hub for the East European markets (scheduled and charter)

11. Pursue the development of new tourism product that would enable KZN to target relevant new markets

12. Pursue market opportunities created if DIA runway is extended

13. Use the change in perception of SA now being a relatively safe destination in market opportunities

14. Develop strategies that supports the use of smaller airports in KZN located in areas with high tourism potential

15. Pursue cargo opportunities, particularly cargo and logistics opportunities that will be generated by the Dube Trade Port

Threats:

1. Schedule and charter operators show no interest in services to DIA

2. Increasing competition faced by the KwaZulu-Natal’s aviation market:

From international destinations

From SA destinations

Amongst SA airports

Between scheduled and charter services

3. KwaZulu-Natal (DIA) continues to lose international leisure tourists to Cape Town

4. The strengthening of the Hub-and-spoke approach - less chance of DIA attracting international direct scheduled services

5. An increase in partnerships between international and domestic carriers – less chance of DIA attracting international direct scheduled services

6. Poor state of the global aviation industry continues – more difficult for second tier airports to attract services as airline requirements for yield become more stringent

7. Inability to access funding for aviation development – government has more pressing funding obligations

8. Poor economic and political environment in KwaZulu-Natal - perpetuating poor perception

9. Lack of national cooperation in tourism matters – inter -provincial competition

10. National aviation policies restricts KwaZulu-Natal’s strategy for aviation growth

11. Continuous lack of national direction - key national aviation and tourism stakeholders have strategies that go in different direction

12. No support from SAA for DIA as an international airport

13. Changes in provincial political environment could lead to decrease in support for aviation

development

14. Lack of common vision in KwaZulu-Natal in respect of tourism and aviation issues

15. Lack of clarity on pace of the development on King Shaka Airport – poor communication

16. Continuous analysis but no action/implementation

17. Possibility that KwaZulu-Natal could spend a lot of money and aviation/charter strategy still be

unsuccessful

18. Lack of overall service excellence in SA tourism industry



B. Strategy

Formulation

Fundamentals

Before providing the recommended strategies for the KwaZulu-Natal Aviation Industry,

it is essential to highlight a number of fundamentals on which the formulation of the

recommended strategies are based:

The ultimate objective of compiling an Aviation and Charter Strategy for KwaZulu-Natal is to achieve considerable future growth in air passenger

demand to DIA and to ultimately enhance the tourism industry in

KwaZulu-Natal. Given the above objective, the focus of the strategy is on demand and not on

supply or infrastructure. From what airport(s) the market generated by the strategy is served is, therefore, inconsequential - the strategy could be implemented whether the main airport is DIA or King Shaka Airport.

The strategies were developed based on a combination of:

o The basis information contained in the Status Quo Report (ie a combination of market conditions/industry trends and operator views, interest and expected actions); and

o The results of the Client’s SWOT analysis.

For an optimum understanding of the Strategy recommendations, it is vital that this Strategy Report not be read in isolation, but be read in conjunction with the Status Quo Report.

The Aviation & Charter Strategy is but one of many strategies developed for KwaZulu-Natal. It both influences and is dependent on other provincial economic, tourism and development planning strategies. It is vital that this Strategy be linked to two strategies in particular - the KwaZulu-Natal Tourism Product Development Strategy and the KwaZulu-Natal Tourism Strategy (“Tourism Strategy 2000”).

The Product Development Strategy specifically addresses the development of product niches that are important for aviation development, ie beach tourism, charter packages, etc and also addresses general environmental factors that are important for both tourism and aviation development, ie the upgrading of the Durban beachfront, the improvement of crime and safety, etc. This Strategy will not cover ground that has already been addressed in other provincial strategies, but will refer to these other strategies, where pertinent.

Grant Thornton Kessel Feinstein was commissioned to develop an aviation and charter strategy for KwaZulu-Natal, however, it is clear from the Status Quo Report that the strategies need to go much wider than only aviation:

o Indeed, the strategies need to focus on the demand for air passenger traffic and this demand is not generated by offering flights, but by the desire to visit a destination. Thus to achieve the objective, ultimately the focus of the strategy needs to be on generating tourism demand, which in turn will then result in an increase in air traffic.

o For this reason, we have split the recommended strategies into aviation specific strategies and tourism strategies. Given the strong interrelated nature of these two industries, strategies may, however, overlap.



For each recommended strategy a similar structure/methodology is followed: o Strategy conditions:

What are the conditions shaping the recommended strategies. o Strategy focus:

What should the focus be in respect of actions required (ie specific and direct actions or indirect actions)?

What should the level of investment be in this strategy (of time and money)?

o Strategy initiatives: Description of the strategy initiative. Indication of importance/priority of the strategy initiative in

attaining the stated objective (1 – essential/must do; 2 - very important; 3 – average importance).

Suggested time frame (short – within 1 year; medium – within 3 years; long – 3 years +; ongoing).

Local stakeholders interviewed continuously indicated that KwaZulu-Natal should concentrate on attracting the charter market. It is clear that there is a misconception amongst local stakeholders on what is meant by “the charter market”, ie do they mean the actual charter flights or the type of passengers carried by these charter flights, which are primarily vacation package or inclusive tour tourists. For the purpose of this study, we are assuming that this means

attracting vacation package type of tourists – as shown in the Status Quo

Report, these type of tourists do not only use charter services to access a

destination, but a large number also use scheduled services.

C. The KwaZulu-

Natal Aviation &

Charter Strategy at

a Glance

For clarity and before diving into the detail of the strategy, we provide below a brief outline of the essence of the total strategy:

International Air Services: o Growth in international passenger arrivals to be achieved through

significant investment in the international charter market (attracting vacation package tourists) – this relates to both scheduled and charter services.

o Accept the lack of interest for direct scheduled operations to DIA and concentrate instead on other measures to generate international traffic to DIA. In other words, do not fight it, but develop ways to strengthen DIA’s position within the hub-and-spoke system, ie international tag services, seamless domestic connection to/from DIA, etc).

Domestic Air Services: o Defend existing share of domestic market. o Pursue growth in specific market segments, ie accept that KwaZulu-Natal

is an economy destination and pursue strategies to strengthen this niche.

D. KwaZulu-Natal

Aviation-Specific

Strategy

Recommendations

Given the different nature of and conditions within the various sub-markets of the

aviation industry and as a consequence the varying strategies required to address

such differences, the Aviation-Specific Strategy is separated into the major sub-

markets within the greater aviation industry, viz:

International Scheduled Air Service Strategy

Domestic Scheduled and Charter Air Service Strategy

International Charter Air Service Strategy



1. International

Scheduled Air

Service Strategy

Strategy

Conditions:

Conditions in the international scheduled air service industry are tough and extremely competitive, resulting in airlines being increasingly selective in deciding which routes to operate – route yield and profitability is the key requirement.

Airlines show limited to no interest in operating direct services to DIA, primarily because they judge the required yield on this route to be lacking.

Airline strategies such as the strengthening of the hub-and-spoke approach in preference of JIA as the hub and forging and strengthening of partnerships with domestic carriers, strongly curtail the possibility of attracting direct flights to DIA.

Strategy

Focus:

Endeavours/actions:

Investment:

Direct & Indirect

In time and money – low

Strategy

Initiatives:

Description: Importance Time-frame

1. Pursue the operation of Tag or Split Services by

airlines that carry traffic on routes related to the top 3-5

foreign tourist generators for KwaZulu-Natal.

3

Medium

2. Cooperate and negotiate with all relevant international

airlines (those airlines carrying traffic from important

generators of foreign tourism to KwaZulu-Natal) to

accomplish as seamless a domestic connection to DIA

as possible, ie:

o Single ticketing o Automatic on-booking of baggage o Connection flights

o Good pricing of domestic connections to DIA

Similar to the strategy of the Queensland

Aviation Unit (see Annexure A).

2

Short -

Medium

3. Block booking of seats to obtain discounted rates to

use for the vacation package market. (See also E.

Tourism Strategies.)

1

Short-

Medium

4. On an annual basis keep in touch with relevant airlines

to understand their requirements for operating direct

flights to DIA and assess KwaZulu-Natal’s status in

complying with the requirements. (See also F. Support

Strategies.)

3

Medium –

Ongoing

2. Domestic

Scheduled & Charter

Air Service Strategy

Strategy

Conditions:

The South African and DIA domestic scheduled industry: o Comprise only a small number of large players; considered to be over-

traded. o Is dominated by SAA. o Is highly competitive. o Achieves only average utilisation, caused by low off-peak utilisation

(for example the average number of passengers per landing for DIA in 2001 was only 61).

Domestic scheduled airlines expect no to limited growth in domestic passenger demand to DIA in the short term. No changes to current frequencies are expected.

Only ad-hoc services are currently operated to small airports in KwaZulu-Natal. At this stage operators indicate that the market demand willing to pay the price that would cover the cost of operations and allow for a profit on the routes is not large enough to warrant any type of scheduled charter services.

Strategy

Focus:

Endeavours/actions:

Investment:

Direct & Indirect In time and money – low



Strategy

Initiatives:


1. Cooperative marketing and packaging with airlines to

obtain discounted rates from airlines on non-peak

flights to use for domestic vacation packages and

domestic transfers of international vacation packages.

(See E. Tourism Strategies for more detail.)

1

Short -

Medium

2. Negotiations with Kulula to look at increasing the

number of flights with low price seats to DIA and the

offering of specialised packages. This means

accepting that DIA is an economy destination and

further developing economy markets.

2

Short –

Medium

3. Negotiations with small domestic scheduled and

charter airlines to pursue the development of regular

services to prominent tourist areas such as KwaZulu-

Natal far north coast.

3

Medium -

Long

3. International

Charter Air Service

Strategy

Strategy

Conditions:

Europe is the major generator of charter flights.

Charter operators take no financial risk, they fly when contracted by a tour operator. Charter operators have no to limited influence on where they fly to and when.

The extent of long haul charters are decreasing, primarily due to scheduled airlines offering cheaper fares than what it costs per seat to operate a charter service. Also, by using scheduled seats rather than charter services, the tour operator limits financial commitment and assumes less risk in offering a destination.

Most charter aircraft cannot fly non-stop between Europe and DIA or elsewhere in South Africa. A stop around central Africa is required. For these operators the current runway length at DIA is sufficient.

A few charter companies operate aircraft that can fly non-stop between Europe and DIA. For these operators the current runway length is not sufficient, it needs to be extended to 3,2 kilometres.

The cost of operating charter flights is higher to destinations where the charter operators have no other current services in the region, due to crew scheduling and infrastructure costs.

Strategy

Focus:

Endeavours/actions:

Investment:

Specific actions directed at the charter operators, not the charter market. In time and money – medium to high

Strategy

Initiatives:


1. Tourism KwaZulu-Natal or the to be established

dedicated aviation entity/person (see F. General

Support Strategies) to negotiate directly with charter

operators in respect of frequencies, timing, costs,

incentives, etc. The negotiated deal should then be

offered to tour operators, rather than waiting for the

tour operator to do the negotiations with charter

operators and indicating no interest in the destination

due to the too high charter cost. Within this strategy

KwaZulu-Natal province would need to consider

measures to reduce/subsidise the cost of the air

services, making it as attractive as possible for tour

operators, for example reducing the financial risk to

charter operators by providing complimentary

accommodation for crews during the developmental

phase of charter development (particularly important

for Eastern Europe), reducing landing fees and hanger

fees, etc.

This strategy is considered to be part of the pre-

packaging of the destination for vacation packages.

(See also E. Tourism Strategies).

Similar to the strategy of the Queensland Aviation Unit (see Annexure A).

2

Short –

Medium –

Ongoing



2. Pursue vacation packages in markets where no

scheduled services to SA are currently operated and

target charter operations to service these packages.

Eastern Europe is a specific target area for this

strategy.

3

Medium –

Ongoing

3. Negotiate with ACSA and other relevant national,

provincial and local stakeholders for the development

of required infrastructure at DIA, including particularly

the extension of the runway to 3,2 kilometres.

Refer to Section J for further detail on the runway extension.

2

Medium

4. Investigate and develop measures by which Tourism

KwaZulu-Natal could assist tour or charter operators

with the selling of seats-only tickets in South Africa.

3

Medium

E. KwaZulu-Natal

Tourism Strategy

Recommendations

in Support of

Aviation Strategies

Some strategies are not necessarily aviation specific, but are required to increase demand for aviation passenger services. In most cases these strategies would be termed tourism strategies. Although Tourism KwaZulu-Natal and other tourism authorities within the province are undertaking a great number of strategies, all of which have as their aim to increase tourist traffic, we focus in this instance only on tourism strategies that are needed to support the growth of the aviation industry,

specifically the development of the vacation package tourist market.

1. Strategies to Attract

Vacation Package

Tourists

Strategy

Conditions:

Important industry trends: o Europe is the major generator of vacation package tourists. o The best way to access these tourists are through tour operators that

package products and destinations for these markets. o This market is characterized by the dominance of four to five mega

tour operators (mainly British and German) that hold around 70% of the total vacation package market. The remainder is made up of a large number of small to medium tour operators located throughout Western and Eastern Europe.

o The major portion of vacation packages offers beach products. o Conditions such as the 35-hour work week in France are creating new

demand for vacations during non-traditional periods. French tour operators have dropped 3-week packages and are adding 1-week packages for the “off-season”.

o Tour operators use a combination of charter and scheduled services for vacation packages, dependant upon the extent and cost of scheduled services. For long-haul destinations, the use of scheduled services, rather than charter services are increasing in popularity.

o The successful vacation package destinations usually have scheduled and charter services operating in tandem, however, charter services are often allowed to service only specific destinations within a country with a high level of vacation package tourists, for instance Phuket in Thailand, Mombassa in Kenya, the Dominican Republic in the Caribbean, whilst the other destinations within the country are serviced by the scheduled airlines.

Tour operator interviews: o Indicate that Durban currently comprise the product to offer beach

packages to a portion of the vacation package market, although ultimately large scale beach resorts would be required to completely break into the market and successfully compete against established long haul vacation package and beach destinations such as the Caribbean, Thailand, Mombassa, etc.

o And particularly mega tour operators, at this time show limited and reluctant interest in offering Durban as a vacation package destination.

Strategy

Focus:

Endeavours/actions:

Investment:

Specific actions directed at the vacation package tour operators, and not only the charter operators. In time and money – high



Strategy

Initiatives:


1. Tourism KwaZulu-Natal to carry out the packaging of

the product to cater for the vacation package market

(both domestic and foreign), ie put together all services

(accommodation, transport) and activities required

within a vacation package. Of course, in order to do so

successfully, Tourism KwaZulu-Natal need to

understand what is required within a package, which

will require some research pre the packaging. Tourism

KwaZulu-Natal acts as the package coordinator and

then offers the already packaged product to

international tour operators.

(This should be carried out in line with the KwaZulu-

Natal Tourism Product Development Strategy).

1

Short -

Medium

2. Use pre-packaged product to target the domestic

vacation package market, utilising discounted

negotiated domestic seats in off peak periods or seats

acquired from the collaboration with Kulula.



1

Short –

Medium

3. Target smaller European tour operators:

a. Using pre-packaged products to entice

b. Using scheduled air services – where

possible the block-booked discounted seats

c. KwaZulu-Natal’s portion of marketing

collaboration assistance is provided as the

pre-packaging of product.

d. As a last resort - offering marketing

incentives from the Vacation Package

Marketing Collaboration Fund (see below).

1

Short –

Medium

4. Continue negotiations with mega tour operators:

a. Using pre-packaged products to entice

b. Using pre-negotiated attractive charter deals

to entice

c. Using block-booked scheduled air services

to entice

d. As a last resort - offering marketing

incentives from the Vacation Package

Marketing Collaboration Fund (see below).

2

Medium

5. Included in the packaging of product should also be the

organisation of linkages with other destinations

(outside the province) that would enhance the

attractiveness of packages to Durban or KwaZulu-

Natal, such as Cape Town, Victoria Falls, Kruger

National Park and perhaps, from a charter perspective,

Mombassa. The need for this should be clearly

identified in the pre-packaging research and if positive,

Tourism KwaZulu-Natal needs to undertake

negotiations with and obtain agreements from product

owners at linked destinations as well as with transport

operators/authorities.



2

Medium



6. Establish a Vacation Package Marketing Collaboration

or Assistance Fund.

At this stage, we believe the province needs an

initial investment of at least R30 million in the

fund, to be used for marketing partnerships with

tour operators, spread over no more than 3

years.

Of course the amount allocated to a tour

operator should be commensurate with the

benefits to be obtained from the agreement, ie

based on an agreed number of tourists within a

specific time period.

Refer to Section I for details on the Marketing Collaboration Fund, viz: An indication of how the R30 million is

determined

The return on investment to be required from distributed funds

A draft Operator Assessment Model A suggested funding mechanism

2

Medium –

Ongoing

7. Instigate/commission a study to identify exactly what

investment is required in new tourist product in order to

attract a greater proportion of the vacation package

market and to produce a plan specifying the needs, the

cost, the benefits, the measures, the timetables, etc.



2

Medium

8. Develop and implement a Tour Operator Assessment

Model to assist in assessing and making decisions on

potential package offers.

(See the Draft Tour Operator Assessment Model provided in Section I below).

2

Short –

Ongoing

2. Other Tourism

Strategies

Strategy

Conditions: As above.

Strategy

Focus:

Endeavours/actions:

Investment:

Indirect actions linked to existing Tourism KwaZulu-Natal marketing strategies. In time and money – medium

Strategy

Initiatives:


1. Strengthening and supporting of existing tourism

marketing strategies that target the attraction of events

to Durban. For the purposes of this strategy, the

strengthening relates to aviation support measures, ie

the use of dedicated and capable persons to assist in

event negotiations by making deals with international

charter companies for transporting event delegates on

an ad-hoc basis. Such a support service would by

particularly important where direct air services is a deal

breaker in winning the event.

3

Ongoing

2. Continuously inform and influence provincial and

Durban specific tourism and economic strategies and

action plans in order to develop the level and structure

of demand required by international airlines.

3

Ongoing



F. General Aviation

Support Strategy

Recommendations

Strategy

Conditions:

The KwaZulu-Natal Aviation and Steering Committee has to date operated mostly in isolation in its attempt to stimulate aviation demand, but to ensure the success of the above listed specific strategies, support is required from various entities on a national, provincial and local level.

At this stage, activities to stimulate aviation demand has been haphazard and carried out by different members of the Aviation and Charter Steering Committee, which all have other commitments. Dedicated capacity to deal with aviation issues is lacking.

Although the desire exists intra-provincially as well as on a Durban city level to cooperate in respect of aviation matters, to date the common framework to achieve such cooperation has been absent.

Strategy

Focus:

Endeavours/actions:

Investment:

Indirect actions to ensure the success of Aviation Specific and Tourism Strategies. In time - medium. In money – low.

Strategy

Initiatives:


1. Establishing a dedicated aviation capacity:

a. This capacity could be provided by one capable and knowledgeable person.

b. This person should have background and expertise in both the aviation and tourism industries.

c. Given the interrelated nature of aviation and tourism as shown by this study, it is recommended that this capacity be housed within Tourism KwaZulu-Natal.

d. This capacity would be responsible for driving and implementing the KwaZulu-Natal Aviation and Charter Strategy and all related initiatives.



1

Short

2. Establish an Aviation Development Fund. At this

stage, we believe the province needs at least R1

million per annum in the fund, to be used for

implementing the various non-tourism initiatives

recommended in this strategy document.

1

Short –

Ongoing

3. Develop and implement a KwaZulu-Natal Aviation

Lobbying plan, specifying:

a. Who to lobby (ie at national, provincial and

local level)

b. What to lobby for

c. Through which measures/processes to lobby

d. Who should do the lobbying

e. When to do the lobbying



3

Ongoing

4. Develop and implement an airline cooperation

mechanism. This should allow for continuous

cooperation with airlines that would provide information

on the plans of airlines and would give the province an

opportunity to obtain understanding and buy-in for

provincial aviation requirements and initiatives.

3

Ongoing



5. Establish an intra-provincial aviation cooperation

framework. It is also important as part of this

framework or perhaps as the starting point of the

framework, to develop and implement an aviation

awareness campaign to ensure that all provincial

stakeholders share common knowledge and to

eliminate the incorrect perceptions on aviation matters

that currently exist.

2

Short –

Ongoing

G. Summary of

Strategy Initiatives

In order to obtain a quick overview of the various strategy initiatives outlined above as

well as an idea of the priority ascribed to the initiatives, we provide below a summary

of the strategy initiatives.

The summary shows that a total of 25 separate initiatives were specified within the

greater Aviation and Charter Strategy. As can be expected, the largest number is

airline specific although a significant number (8) is tourism specific. Of the 25

initiatives:

8 are rated as essential (most of which are tourism strategy initiatives);

8 are rated as very important; and

9 are rated as of average importance.

As stated in Section B – Strategy Fundamentals, the initiatives rated as essential are

must do initiatives and mostly need to be carried out before other initiatives can

commence. This interdependence between the initiatives also extends to the success

of initiatives.

The suggested order in which the strategy initiatives (only the top 10) should be

established is provided in the second Figure below. The order is based on the priority

assigned to the initiative as well as the number of times an initiative is mentioned as an

interdependent.



Coding: Essential – red; Very important – orange; Average importance – blue.



Coding: Essential – red; Very important – orange; Average importance – blue.



H. Aviation Demand

Projections

The detailed aviation demand projections together with all assumptions and sources

for calculations are provided in Annexure B. Aviation demand projections are

provided for four scenarios:

o Status Quo

o Low Road

o Middle Road

o High Road

Five year growth in passenger demand (departing and arriving) from the base of

current (2001) actual passenger demand numbers for DIA is projected for each of the

above scenarios by major category of passenger:

o International scheduled direct passengers

o International charter direct passengers

o International passengers on the DIA domestic routes

o Domestic passengers

It must be stressed that these demand projections are indicative only. The

potential of achieving the projections will depend on the successful execution of all

elements of the Aviation and Charter Strategy. It is possible that the strategy may be

successful for one passenger category, ie attracting charter operators, but may fail for

another, ie arranging scheduled Tags or direct international scheduled flights. The

demand projections in each scenario will then need to be adjusted accordingly.

The resulting projected number of package tourists is tested for validity against the

number of beach tourists by scenario projected in the Beach Tourism Study carried out

by Grant Thornton Kessel Feinstein in 2001 on behalf of Tourism KwaZulu-Natal (the

relevant section of this study is provided as Annexure C to this report). The

projections in this study were made for the entire Eastern Seaboard of South Africa,

which includes the Eastern Cape and KwaZulu-Natal coastline. The projections in

Annexure B assume that KwaZulu-Natal would attract a large proportion of the total

target market, but it also assumes that its penetration will be inhibited by the current

lack of beach resorts on the Eastern Seaboard.

In summary, Annexure B projects:

o Status Quo Scenario:

Total passenger demand to increase from 2,6 million in 2001 to 3,0

million by 2006.

A compound growth pa over the five years of 3,0%.

o Low Road Scenario:


million by 2006.


That the number of package tourists to DIA (using either scheduled or

charter services) will increase from around 4 000 in 2002 to 94 000 by

2006.



By 2006 the total number of charter flights will equate to 4 per week.

Given that charter operators indicated that at least 3 frequencies per

week are required for a viable route, this translates to 1,5 charter

operators.

o Middle Road Scenario:


million by 2006.




2006.



week are required for a viable route, this translates to 3 charter operators.

o High Road Scenario:


million by 2006.




2006.



week are required for a viable route, this translates to 4,3 charter

operators.

I. The Marketing

Collaboration Fund

Strategy Initiative

Elaborated

We have elaborated below on a number of elements of this strategy initiative, viz:

1. We indicate how the suggested R30 million minimum funding requirement

is derived.

2. We develop an Operator Assessment Model, which includes a

specification for the return to be achieved on the investment of marketing

collaboration funds.

3. We specify the expected benefits to accrue from an investment.

4. We suggest a potential funding mechanism.

1. Funding Requirement

Deriving at an initial funding requirement of R30 million was by no means a complex

calculation, but was based simply on an assessment of the indications of marketing

collaboration funding requests as specified by various tour operators (large and small)

to Tourism KwaZulu-Natal and to ourselves during the interview process.



Requests for Marketing Collaboration Funds are forthcoming mainly from operators

that compile major vacation package advertising material (ie brochures or catalogues).

The larger or major operators require more significant collaboration funding than the

smaller operators, but these large operators also generate or could generate

significantly larger numbers of tourists. Most of the larger operators will not consider

offering a destination without the required marketing collaboration funding. The

requests for collaboration funding range from small amounts to as high as R20 million.

It is expected that the large operators would want at least R10 million as an initial

investment. It is expected that such a large investment with one operator would be a

once-off occurrence in order to establish the destination and that in future either a

small further investment may be required from the destination or the operator would

cover their marketing cost out of income generated from packages to the destination.

The R30 million funding requirement (over a 3-year horizon) is derived according to

the following assumptions:

Targeting at least 2 large operators @ R10 million each = R20 million

Targeting a number of smaller operators (say at least 5 @ R1

million each) = R5 million

Funding for worthwhile ad-hoc collaboration requests of smaller

operators (that are not specific targets but that approach the

destination for collaboration funding) + funds to cover

disbursement costs incurred in the targeting/negotiation process

(ie travel, accommodation, etc)

= R5 million

It must be stressed that the suggested initial funding requirement of R30 million

is the minimum that we believe should be allocated to this fund in order to

commence the vacation package market drive. In fact, the calculations under

point 4 of this Section indicates that R30 million would only support the initial

drive (first 2 years) required in order to achieve the Low Road Scenario as per

the potential demand projections (Annexure B).

It is suggested that a myriad of small collaboration investments be avoided as these

could become cumbersome to manage in relation to the potential impact to be

generated. However, as some potential collaboration requests could require a small

funding requirement but provide major benefits, all relevant requests should be

assessed according to the Tour Operator Assessment Model provided below to

determine whether it satisfies the Return on Investment and other criteria.

2. Draft Tour Operator Assessment Model

A draft model for assessing tour operator offers or contracts is provided below.

The draft model requires that an operator be assessed according to both quantitative

and qualitative criteria or according to only qualitative criteria if quantification is not

relevant. Quantitative assessment is also referred to as a “Return on Investment”

specification.



It is suggested that:

This model be expanded/altered as is required when it is put into use as we assume that

additional criteria (particularly qualitative criteria) may become evident as necessary.

An importance weighting be allocated to each criteria.

An operator be rated against each criteria and together with the weighting a total score be given

to the operator or a pass/fail rating per criteria be allocated, in order to ascertain the overall

attractiveness of the operator.

Quantitative Assessment Criteria or “Return on Investment”:

The quantitative assessment of an operator should be based on a return on

investment calculation. Should no investment from Tourism KwaZulu-Natal or

other parties in the province be required by an operator to deliver package tourists

to KwaZulu-Natal, the assessment of such an operator should be based on non-

quantifiable criteria only (see below).

The following return on investment equation is proposed:

o The total annual value of the contract should exceed the annual

investment made by KwaZulu-Natal in the relationship 5.2:1, ie:

For every one Rand of expenditure/investment by KwaZulu-Natal

province, R5.2 of direct expenditure within KwaZulu-Natal should be

generated.

This equation is based on the calculation provided in the KwaZulu-Natal

Tourism Strategy 2000 as a target for 2002/2003 – a Tourism Budget of

R35 million is expected to generate direct expenditure of R182 million.

The Figure Below shows how this equation translates into real numbers. In

summary the figure indicates that:

o If KwaZulu-Natal allocates R10 million to a specific operator in marketing

collaboration funds (investment), the contract would have to guarantee

direct expenditure in KwaZulu-Natal (return) of at least R52 million.

o Given the assumptions in respect of expenditure per package tourist, this

operator would have to deliver at least around 11 700 package tourists to

KwaZulu-Natal (equalling 39 charter flight movements) to warrant the

investment.



Qualitative Assessment Criteria:

Apart from the quantitative assessment model, the tour operator should also be

assessed according to the following qualitative criteria:

Calculation of Investment vs Expenditure Relationship:

2002/3

Tourism KZN Budget (R'million) * 35

Direct Tourism Expenditure (R' million) * 182

KZN Investment:Tourist Expenditure Generated 1 : 5.2

7-Day Package price in pounds ** 700

Pound/Rand Exchange Rate 16.5

7-Day Package price in rands 11,550

Minus Costs:

Overseas tour operator commissions @ 25%*** R 2,888

Return airfare *** R 3,500

= Expenditure in South Africa R 5,163

Avg # of nights in KZN # 5

= Expenditure in KZN R 3,688

Average additional expenditure per package per day # R 150

TOTAL EXPENDITURE IN KZN PER PACKAGE TOURIST R 4,438

Assumed KZN marketing investment with tour operator R 10,000,000

Direct tourist expenditure required as per above equation R 52,000,000

Avg # of tourists required to generate required expenditure 11,718

Avg # of package tourists per charter flight 300

Total number of charter flight movements 39

Sources:

* KwaZulu-Natal Tourism Strategy 2000

** Status Quo Report Data - in line with Mombassa packages

*** Assumption - industry average

# Assumption

RETURN ON A MARKETING COLLABORATION FUND

INVESTMENT

Example to Test # of Package Tourists Required to Satisfy Above

Equation:



1. Number of package tourists committed to within the agreement:

From this it is again possible to work back to a total investment that is feasible.

2. Package price:

Is the package price proposed feasible;

Does the proposed price allow for adequate local expenditure.

3. Time period of commitment:

Is it a look see approach only or will the operator commit to offer KwaZulu-Natal for a specific period; and

What is the extent of the period, ie 1 year, 2-years, 3-years, etc.

4. Timing of year of packages:

Would the operator only offer packages for a certain number of weeks per annum or would it offer packages throughout the year;

Would it offer packages in the South African peak season or non-peak season and in the generating market peak season or non-peak season.

5. Potential for future growth in package tourist numbers from the operator:

What is the total market share of the operator or the total market size that it commands; and

How much growth potential is available for KwaZulu-Natal packages.

6. KwaZulu-Natal tourism product suitability:

To what extent is current product suitable;

What level of new product development is or will be required.

7. Track record of operator:

In delivering similar packages to other destinations, particularly long haul destinations.

8. What type of air access is the operator proposing:

Scheduled versus charter flights

If scheduled access: o The extent of available frequencies on the

applicable route; o Likelihood of attaining affordable economy

seats in the periods required.

If charter: o Can the infrastructure in KwaZulu-Natal cope

with the type of charter aircraft proposed; o Has the operator already in principle committed

to a charter operator.

Proposed airfare – in total terms and as a proportion of total package price.

Is direct air access an absolute requirement, ie a dealmaker.

9. Complimentary products in the region:

To pursue potential linkages if important to the operator’s market.

10. Quality of the operator’s marketing collateral:

Assess the overall quality of the brochures and other marketing materials released by the operator;

In particular, assess the KwaZulu-Natal sections of the operator’s marketing collateral to ensure that it is in line with the provinces tourism marketing and tourism product strategies.

11. Non-cash assistance & collaboration required:

Liaison with airlines

Liaison with SAT, DoT, etc



3. Benefits to Accrue from a Collaboration Fund Investment

As per the assumptions in the “Return on a Marketing Collaboration Fund Investment”

Figure above, a R10 million investment with a vacation package tour operator should

result in the following benefits to KwaZulu-Natal Province (most of which will probably

accrue to the Greater Durban area):

At least around 11 700 vacation package tourists;

Around 40 charter flights (if only charter flights are used);

Additional direct tourism expenditure of R52 million (this only relates to direct

tourist expenditure; additional expenditure could also be expected from

landing and passenger fees at DIA, etc);

Around 1000 additional full time jobs (The national employment multipliers released by

the Central Economic Advisory Service (“CEAS”) in 1996, imply that for every R1 million of

direct expenditure, 26,02 jobs are created in the trade and catering sector. Taking inflation into

consideration, we project that for every R1 million of additional, direct expenditure, 19,1 jobs will

be created in the trade and catering sectors in 2002 expenditure terms).

4. A Suggested Funding Mechanism

Worldwide Trends in Initial Funding of Vacation Package Industries:

In assessing the development of successful vacation package or inclusive tour

package destinations, it is evident that the success of some destinations, such as

Turkey, Cyprus, the Dominican Republic in the Caribbean and the Mombassa area in

Kenya, was due to the efforts of the private sector, whilst the success of other

destinations, such as Thailand and the beach resorts of Egypt, was due to the

interventions or efforts of government (for the interest of the Client, we have attached

case studies on the development of several well-known beach destinations as

Annexure F).

There is no clear evidence, however, that success in the vacation package market is

more likely if introduced or driven by private sector than by government.

However, it must be stressed that where private sector was the driver, it was not the

resident tourism industry, but the international tour operators (primarily European) that

promoted and kick-started these markets, ie developing new destinations for their

tourists. Evidence shows that the destination country tour operators find it very difficult

to compete for traffic in the major originating markets, unless in partnership with the

source market operators. The extensive advertising and other marketing activities of

the companies based in the traffic-originating countries are powerful advantages.

They create strong preferences for their own services and foreign companies from the

destination countries find it difficult to compete. This was the case for instance in

Cyprus, where the local industry tried unsuccessfully to compete head on with the

source country operators.



Funding Mechanism Approach:

Given current conditions in the worldwide tourism and aviation industry and the general

lack of interest of international operators to be the instigator of the vacation package

market in KwaZulu-Natal (or any new destination at this time), it is our opinion that

significant numbers of vacation package tourists are unlikely to be attracted to the

province if not pioneered by a concerted governmental effort and investment (refer

also to the Aviation Status Quo Report).

It is suggested, therefore, that the initial investment to drive the establishment of a

vacation package market for KwaZulu-Natal be sourced from government, but that the

future funding responsibility move to the local private sector as this market develops,

picks up momentum and the benefits are enjoyed by the local private sector, ie

reinvesting in the market to sustain its growth.

Illustration of the Suggested Funding Mechanism:

An illustrative funding timeline given the suggested funding mechanism is provided in

Annexure D. The model shows a detailed calculation of the marketing collaboration

funding requirement to support/achieve the projected demand projections, as well as

what the government and private sector contributions should/would be.

The funding mechanism assumes that:

The required marketing investment in the early years would be significant, but

would decrease significantly once the market is established and only organic

growth is achieved. We have assumed that a strong drive will take place in

the first five years in order to penetrate/establish this market, but that from

year 6 onwards, growth will decline to a steady (organic) level.

Government will contribute all of the funding in the first 2 to 3 years.

Private sector will start to contribute to the funding from year 3 onwards when

the size of this market becomes fairly substantial, and government’s

contribution will decrease accordingly and cease completely by year 5.

Private sector’s contributions will initially be based on an assumed levy of 3%

of the revenue generated from this market but will decrease to a lower

percentage each year until the level is reached where its contribution to date

equals that committed by government. For a number of years, private sector

will be contributing more than is required to attract additional tourists for that

year in order to bring its total contribution in line with government’s total

contribution, and a buffer for future year funding will be generated.

Once the contributions are equal, future marketing funding will be supported

though the Funding Buffer until that is depleted. A decision can then be made

whether to reinstate a private sector levy or to use another mechanism.



Based on the Low Road Demand Scenario:

A total of R90 million is required over the first 5 years for marketing funding in

order to attract 202 000 vacation package tourists; decreasing to R18 million

for the next 5 years to attract 310 000 tourists = R108 million of collaboration

funding over ten years for 510 000 tourists. This translates into a marketing

cost of roughly R200 to attract each vacation package tourist.

Government will contribute for 4 years (a total of R72 million).

Private sector will start to contribute in year 3 and will equal the government

contribution of R72 million in year 8 (within 6 years).

At the time of equal contribution a Funding Buffer of R31 million would have

been generated, which should support organic growth marketing funding

required for several future years and private sector’s contribution will cease

until the buffer is depleted.

J. The DIA Runway

Extension Strategy

Initiative

Elaborated

Background/The Approach:

Firstly we would like to stress again that the investigations for the Status Quo Report,

identified that the runway extension is not a number 1 priority, because:

Most charter aircraft cannot fly non-stop between Europe and DIA or

elsewhere in South Africa. A stop around central Africa is required. For these

operators the current runway length at DIA is sufficient.

Only a few charter companies operate aircraft that can fly non-stop between

Europe and DIA and only for these operators the current runway length is not

sufficient, and would need to be extended to 3,2 kilometres.

The feasibility of extending the runway to the full 3,2 kilometres will therefore depend

not only on whether enough additional traffic could be generated to support the

additional cost, but what percentage of the additional traffic will in fact require the

extension.

According to ACSA:

If the runway is extended to 3 kilometres, it would allow 90% of all types of

aircraft to take off fully laden. The cost of such an extension will be around

R50 million.

In order to accommodate all types of aircraft fully laden, the runway should be

extended to 3,2 kilometres. However, this would mean extending the runway

over a canal and the cost of doing so would be double or even triple to that

estimated for the 3-kilometre extension.

The total average income generated per wide-bodied aircraft landing (that

would require an extended runway) is around R34 800 in 2002 (R10 400 from

aircraft landing fees, R660 from parking fees and R23 700 for passenger

service fees – R85 per passenger).



As only the very large wide-bodied aircraft require an extended runway, we

have assumed an average load factor per aircraft landing of 70%, an average

of 280 passengers per aircraft landing.

Source: ACSA, Government Gazette and Boeing website.

The Calculation:

The calculation of the number of flights required to cover the cost of the runway

extension is provided as Annexure E.

We stress that this calculation is indicative only as the extension costs are a

rough estimate provided by ACSA and no detailed costing has been undertaken

in this regard. We strongly suggest that more detailed investigations be

undertaken before decisions are made in this regard.

It is calculated that to cover a total extension cost of at least R100 million, around

2 500 additional wide-bodied aircraft landings would be required. Given an expected

opening of King Shaka Airport in 2006, we have assumed that this estimated number

of landings would need to be achieved in 5 years.

If the number of additional aircraft landings for the vacation package demand is

considered (the portion of total demand that would most likely require large wide-

bodied aircraft that may need the runway extension), Annexure E shows that not

under any of the scenarios would sufficient landings be generated to satisfy the runway

extension feasibility requirement. Although the high road scenario comes close, we

expect that not all of the vacation package demand would access the destination by

aircraft that require an extended runway.

Conclusion:

Given inadequate landing projections to cover the runway extension cost in the

assumed 5 years, we suggest that should it be deemed absolutely necessary to

extend the runway:

Negotiations are undertaken with ACSA to consider not achieving a 100%

coverage of costs; or

Ways are considered by provincial and local government to subsidise the cost

of the extension; or

Consideration is given for DIA to operate for longer in order to spread the

landing requirement over more years to allow for viability.



KZN AVIATION & CHARTER STUDY

Annexure A – Definitions/Airline Terminology

Definition/Terminology Description 1. Airline service categories:

Scheduled services:

Operate on defined routes - domestic or international

For which licenses have been granted by governments concerned

Operate on basis of published timetables, regardless of passenger load factors

Trunk route airlines – scheduled airlines operating between hub airports

Regional feeder airlines – scheduled airlines operating between hub airports and smaller rural airports

Charter services:

Do not operate according to published timetables

Seats sold not by airline but by middlemen (tour operators)

Can also in some countries sell “seat only” packages on charters – particularly grown in Europe

Air taxi services: Privately chartered aircraft accommodating between 4 & 18 people, usually business people

2. Hub and spoke route system

Major airlines concentrate on routes between hubs and regional airlines provide service from hubs outward along spokes to secondary areas

3. Principles of international aviation - Chicago Conference, 1944

Sovereignty of each nation over its own air space

Right of all nations to participate in air traffic

Nondiscriminatory regulation of airline traffic

Freedom of each nation to designate its own carrier to operate in its air space

4. Five Freedoms of the air

1: fly across its territory without landing

2: land for non-traffic purposes

3: put down passengers, mail and cargo taken on in the territory of the state whose nationality the aircraft possesses

4: take on passengers, mail and cargo destined for the territory of the state whose nationality the aircraft possesses

5: take on passengers, mail and cargo destined for the territory of any other contracting state and put down passengers, mail and cargo coming from any such territory

Freedom’s 1 & 2 are signed by all nations, but Freedom’s 3-5 are subject to bilateral air service agreements. 3

rd and

4th freedom traffic rights are standard in a bilateral

agreement, but 5th freedom rights are unusual.



5. Areas covered in bilateral air service agreements

Specification of routes

Designation of airlines

Restrictions on ownership and control of designated airlines

Fair opportunities

Agreement on setting rates

Frequency/capacity limits

6. Cabotage Each state reserve to its own aircraft the exclusive right to carry traffic between two points in its own territory

Exclude foreign airlines from domestic routes

7. 6th freedom Carry traffic between the home country to another country by way of an intermediate country with which there is already an agreement on Third and Fourth Freedom traffic rights, ie carriage of traffic by a Dutch airline from London, via Amsterdam, to Athens.

8. Alliances:

Non-Equity Alliances: (most common)

More flexible and less constrictive that equity alliances

Primarily a sharing of specific routes and marketing cooperation

Code sharing the most used non-equity alliance – carriers maintain their full independence, wherein (1) each purchases a block of seats on the other carrier’s flight and sells them as if they were its own; or, (2) the marketing carrier sells seats (“freeflow”) on the operating carrier.flights and collects a “code share” commission.

Equity Alliances: (less common)

Higher degree of involvement of members in each others’ affairs

More highly integrated

Establishment of joint activities and infrastructure

9. Code Share An agreement between two or more carriers to operate a single flight under separate flight numbers of the agreeing partnes. The carrier whose flight is used is referred to as the operating carrier, while the carrier(s) who adds its flight number(s) is referred to as the marketing carrier. Code share provides an advantage in the display of services in the computerized reservation systems (CRS) used by travel agents who are part of the airline distribution system. The advantage is two-fold:

Local market: benefits because each flight is shown at least twice in the travel agent display

Connecting market: benefits because connections are shown as on-line (single carrier) rather than interline (two carriers). Passengers have an overwhelming preference for single carrier connections



10. Yield The fare paid by a passenger per unit of travel. A passenger traveling 1000 miles generates 1000 revenue passenger miles (RPMs). If the passenger pays $1200, the yield is 12 cents per mile. Yield may also be expressed related to the overall performance of a flight frfom a weight standpoint combining passengers, freight and mail as yield per revenue tonne mile (RTM) or revenue tonne kilometer (RTK)

11. Unit Cost The cost of operating an aircraft divided by the distance traveled and by the number of seats on the aircraft. An aircraft operating 1000 miles with 200 seats at a cost of $16,000 has a cost per available seat mile (CASM) of 8 cents

12. Break Even Load Factor The number of seats that must be filled on a flight to produce a break even operation at the average yield for the flight. A carrier operating at a cost of 8 cents and a yield of 12 cents has a break even load factor of 67%.

13. IATA International Air Transport Association-a trade group of international airlines which, among other functions, collects air traffic statistics and develops forecasts of travel.



ANNEXURE A – CASE STUDY

TOURISM QUEENSLAND AVIATION UNIT

Extract From: Study: “An Economic Impact Assessment Of Varying Domestic And International Flight

Schedules On The Kwazulu-Natal Tourism Industry” Date: August 2000 Client: Tourism KwaZulu-Natal Consultant: Grant Thornton Kessel Feinstein

Tourism Queensland

Tourism Queensland (“TQ”) is a statutory authority within the Queensland Department of Tourism and Racing. TQ’s role is to market and develop Queensland’s tourism destinations and to maximise the social, environmental and economic benefits to the State. Queensland is divided into 14 regional tourism

organisations (“RTO”). Queensland received 14,8 million domestic visitors in 1998, 20% of whom visited the state for holiday purposes. Twenty seven percent of the interstate visitors travelled to the state by air. In terms of international visitors, Queensland attracted 1,8 million visitors in 1998 – 43% of all international visitors to Australia in that year. Seventy three percent of these international visitors travelled to Queensland for holiday purposes. Visitors from the United Kingdom are the third most important source market of international visitors (11%) – after Japan and New Zealand. Queensland is well serviced as a destination from the United Kingdom, with carriers providing direct and indirect connections. BA provides daily services (Boeing 747) between London-Heathrow and Brisbane. Qantas code-shares on these flights. Cairns receives services from London via Singapore and Darwin, on Qantas with BA code-sharing. Indirect services to and from the UK are also provided by a number of 6

th freedom carriers including Cathay Pacific, Singapore Airlines, etc.

Planning and Destination Development:

Within TQ there is a Planning and Destination Development Division consisting of four departments, viz:

Destination development; Industry planning; Research; and Tourism policy.

There is a transport unit within the Industry Planning department. This unit was formed about a year ago and is tasked with the responsibility of addressing all modes of transport, working on transport related policy and strategic issues and researching and identifying commercial opportunities with particular emphasis on aviation, cruise shipping and road transport.

Aviation Unit:

The Aviation unit assists in the development of commercially viable air services to Queensland, as well as providing quality research, analysis and advice to the industry. Its primary function is to identify potential areas of route development that will increase or improve air access to Queensland tourism destinations. This involves working closely with airports, airlines and the tourism industry to track the performance of current air services (domestic, regional and international) and developing airline operating proposals that promote commercially viable flights.



From our discussions with the manager of the Aviation unit we determined that many of the international visitors to Queensland are leisure travellers who tend to demand economy and/or cheaper air tickets. The low demand for business class seats deters many national/large international carriers from operating international flights into Queensland airports. In order to overcome this constraint, the Aviation Unit targets different airlines with a low cost base, for example charter services. In addition, many large carriers have started to operate “low-cost” subsidiary airlines e.g. Virgin Express – these airlines offer reduced service levels and lower fares and are therefore more suited to the leisure tourist market. TQ’s Aviation Unit works closely with State and national government to attract new carriers into the State. The Unit’s approach is to develop a business case for a targeted airline and approach the airline based on this detailed plan. The Unit’s original approach was to try to convince the airline about the State’s tourism attractiveness and existing and potential tourism industry. However, this approach was not successful in wooing international carriers, hence the adapted strategy to prepare a detailed business plan for the targeted carrier. The Unit believes that this approach is paying dividends in enticing operators to evaluate and consider the proposed route with keener interest. In spite of the efforts of the Aviation Unit, BA will be stopping its direct flights between London-Heathrow and Brisbane. Instead the airline will hub at Singapore and Qantas (on a code-share) will transfer these passengers to Brisbane. This is similar to the existing air route between London-Heathrow and Cairns. The Aviation Unit is also responsible for ensuring that tourists’ total travelling time is kept to a minimum. In this regard the unit works with the airports and airlines to ensure that connecting flights are available at the most convenient times.



KZN AVIATION & CHARTER STUDY

Annexure B – Organisations Interviewed & Data Sources

ACSA Air 2000 Air Canada Air India Air Transport World Airwise News Alitalia ATAG Aviation & Allied Business Leadership Conference Papers Boeing British Airways Britannia Business Day Comair DEAT Dertour Durban International Airport Durban Metro – Economic Development Emirates Federal Air First Choice Global Aviation Associates Ltd IATA ICAO Interair IWon Khulula KLM KwaZulu-Natal Aviation & Steering Committee Members KwaZulu-Natal Department of Economic Development & Tourism Lufthansa Menthol Utazasi Iroda Monarch Airlines My Travel Neckermann NTA Research & Development Council OTP Rossair SA Express Safari Travel SA Tourism SAA South African Civil Aviation Authority South African Department of Transport



Southern Sun Standard and Poors Airline Industry Survey Swiss The Charter Guide Travel News Weekly TUI/Thomson Virgin WTO Publications & Statistical Releases WTTC

Documents

FINAL STRATEGY REPORT