lanseria ‘monopoly’ irks budget carrier 
10 April 2008

Low-cost airline 1Time has lodged a complaint with the Competition Commission about its rival Kulula’s exclusive agreement to operate flights from Lanseria International Airport.  Kulula began operating flights from Lanseria, northwest of Johannesburg, in March 2006 with daily flights to Cape Town.

In October last year the low-cost operator increased its flights to Cape Town to three a day and added new routes to Durban and Port Elizabeth.

“We began talks with Lanseria management about two years ago. Then the next thing we heard that they had signed an agreement with Kulula, securing exclusive rights to use the airport, It has been extremely frustrating for us. The domestic air travel market is growing 15% a year while we as an airline are growing 30% a year. We need new routes," said Orsmond.

1Time’s frustration first became apparent in a terse note in its results announcement for the year to December 2007. “The anti-competitive exclusivity agreement between Comair and Lanseria Airport retards fair competition,” the company said.  Lanseria is an attractive alternative to heavily congested OR Tambo Airport and is also more accessible to passengers living in Pretoria and northern Johannesburg.

Gidon Novick, joint CEO of Comair, said that Kulula came to Lanseria at a time when the airport’s management was looking for an established airline to operate from Lanseria following the failure of SA Airlink and the now-failed SunAir to make a success of the Lanseria-Cape Town route.

“We took a risk and made a huge investment. We acquired two aircraft to operate from Lanseria at a cost of R160m as well as spent R30m on marketing and set-up costs. It has been a challenge to make the route profitable and it made business sense to secure a period of exclusivity to bed down the new routes,” said Novick.

“We are an innovative airline and are often copied. This is just such a situation. If you snooze, you lose. You have to take an opportunity when it’s there. If you don’t, then tough.”

Gavin Sayce, airport manager at Lanseria, said yesterday that when SA Airlink ceased flights from Lanseria, management was keen to secure another scheduled carrier at the airport.

Novick admits that the airline had a secured a “great deal” in terms of airport fees but there was a downside to Lanseria in that Kulula had to pay a fuel premium as there was only one supplier. Kulula has achieved load factors of close to 90% during the peak summer season on the routes from Lanseria, but this dropped to below 80% in the slow winter season, said Novick. The low-cost airline had in the past added flights to George during peak summer holiday periods.

In the past few years Lanseria has spent close to R100m expanding the airport, R58m was spent extending the runways and introducing new navigational equipment to bring the airport to international standards. The parking area has also been vastly expanded to cope with the growing number of passengers.

Future plans include a new terminal building alongside the existing building, several new hangars and a new control tower.

“The management team at Lanseria have been exceptionally proactive and responsive to our demands,” said Novick.

Julius Baumann, www.businessday.co.za