From Business Report
kulula slashes fares before rival's entry
January 19, 2004
Cape Town - Kulula.com said last night that it's website had had its "busiest weekend ever" following the news that it had slashed the prices of 100 000 seats by 30 percent to make flying cheaper than surface travel.
The decrease in prices could be seen as a pre-emptive strike against its new rival, 1Time, which is due to be launched in the next few days.
Gidon Novick, kulula's executive director, said yesterday he expected bookings to climb further today because most people booked seats using the internet at their workplace.
Novick said the company had launched its refreshed "super fast" website on Friday and that it had held up well.
Kulula is offering one-way fares between Johannesburg and Durban of R199, plus airport taxes. Fares on all other routes are R299. The offer will last until August but Novick said that although kulula sold 10 percent of its seats through travel agents, the cheaper seats were only available online and were likely to be sold out within two weeks.
There were still seats available, despite the weekend rush.
Novick said these fares were possible because kulula was saving 30 percent of its costs as a result of acquiring four larger McDonnell-Douglas M82 jets to replace the Boeing 737s it had been using.
Rodney James and Glenn Orsmond, 1Time's joint chief executives, said their total cost structure would still be lower than kulula's, whose finances are not separated from those of its parent British Airways/Comair.
James said 1Time was not worried by kulula's price-cutting.
"Clearly it is an attempt to take as many passengers as possible out of the market. But our marketing strategy, which will be announced in a few days' time, is quite different and will come as a shock to them," he said.
"The flying public understand what is going on and realise that fares will go up when kulula's price-cutting ends."
Both James and Orsmond insisted that there was room in the market for two no-frills airlines and that there would always be demand for full-service airlines offering business class.
Novick said kulula already had 15 percent of the total market on the routes it flew, but SAA was still dominant.
Rich Mkhondo, the executive communications manager of SAA, said: "SAA is studying the situation and will remain competitive ... Flying is not just a matter of catching a plane."