INTERNATIONAL FLIGHT CONNECTIONSDeon Cloete16 April 2010

The Impact of the Economic Crises on

Airlines - Global

Passenger Traffic Collapses mid-2008

Passenger Traffic Growth by Ticket Type

-30

-25

-20

-15

-10

-5

0

5

10

15

Ja

n-0

7

Ma

r-0

7

Ma

y-0

7

Ju

l-07

Se

p-0

7

No

v-0

7

Ja

n-0

8

Ma

r-0

8

Ma

y-0

8

Ju

l-08

Se

p-0

8

No

v-0

8

Ja

n-0

9

Ma

r-0

9

Ma

y-0

9

Ju

l-09

Se

p-0

9

No

v-0

9

% G

row

th,

Year-

on

-Yea

r

First/ business

Economy

Source: IATA Premium Traffic Monitor Dec. 2009Source: IATA Premium Traffic Monitor Dec. 2009 Source: Rigas Douganis March 2010

IATA Airlines Traffic Year 2009 v. Year 2008

Markets Passenger Kms%

Freight Kms%

Africa - 6.8 - 11.2

Asia Pacific - 5.6 - 9.2

Europe - 5.0 - 16.1

Latin America + 0.3 - 4.0

Middle East + 11.2 + 3.9

North America - 5.6 - 10.6

TOTAL IATA Members

- 3.5 - 10.1

Excludes LCCs and non-IATA airlinesExcludes LCCs and non-IATA airlines

Source: Rigas Douganis March 2010

Fares falling faster than traffic for IATA airlines

Source: IATASource: IATA Source: Rigas Douganis March 2010

Prospects for African Aviation are Optimistic Annual Growth Rates 2009-2028 (Pass-Kms)

MarketsSub-Saharan Africa to/from

Annual %Growth Rate

PR China 9.3

North Africa 9.0

Middle East 7.5

South Africa 7.4

Indian sub-Continent 7.1

Australia - NZ 5.9

Asia 5.0

USA 4.8

World Average 4.8

South America 4.3

Western Europe 4.2Source: Airbus : Global Market Forecast Source: Airbus : Global Market Forecast 2009-20282009-2028

Source: Rigas Douganis March 2010

The Impact of the Economic Crises on

Airlines – South Africa & Cape Town

ACTUAL PASSENGER NUMBERS AND GROWTH 2000 - 2010

INTERNATIONAL ARRIVING PASSENGERS BY MONTH

POINT OF SALE - Top 16 Foreign Country Markets

Source: ASM MIDT 2010

PAX FARE MIX - PREMIUM & ECONOMY 2 WAY PAX (000)

Source: ASM MIDT 2010

PAX FARE MIX - PREMIUM & ECONOMY 2 WAY PAX (000)

Source: ASM MIDT 2010

International Flight Connections

CTIA DIRECT FLIGHTS – INTERNATIONAL

INTERNATIONAL AIRLINES - DirectArrivals

Aug 2009Arrivals

Feb 2010AIR BERLIN NOT FLYING 8AIR MAURITIUS 9 8ANGOLA AIRLINES (TAAG) NOT STARTED 8BRITISH AIRWAYS PLC 31 52DELTA AIRLINES 13EMIRATES 31 28K.L.M 23 28LUFTHANSA GERMAN AIRLINES NOT FLYING 28MALAYSIAN AIRLINES 8 8S.A. EXPRESS 16 16SOUTH AFRICAN AIRWAYS 31 28VIRGIN ATLANTIC AIRWAYS LTD NOT FLYING 28Grand Total 162 240

Withdrew

CTIA INDIRECT FLIGHTS – INTERNATIONALCTIA DIRECT FLIGHTS - REGIONAL

INTERNATIONAL AIRLINES - IndirectArrivals

Aug 2009Arrivals

Feb 2010ETIHAD AIRWAYS NOT STARTED 28MALAYSIAN AIRLINES 8 8QATAR AIRWAYS 18 16SINGAPORE AIRLINES 13 12TURKISH AIRLINES 17 16Grand Total 56 80

REGIONAL AIRLINES - DirectArrivals

Aug 2009Arrivals

Feb 2010AIR NAMIBIA (PTY) LTD 87 80S.A. EXPRESS 57 54Grand Total 144 134

CAPACITY UTILISATION – Bilateral Air Services Agreements

REGION

TOTAL CAPACITY ALLOCATED: FLIGHTS PER WEEK

CAPACITY UTILISED BY FOREIGN CARRIERS: FLIGHTS PER WEEK

% USED BY FOREIGN CARRIERS: FLIGHTS PER WEEK

CAPACITY USED BY SA CARRIERS: FLIGHTS PER WEEK

% CAPACITY USED BY SA CARRIERS: FLIGHTS PER WEEK

1. AFRICA:1.1 Northern Africa 6 0 0% 0 0%1.2 SADC 238 49 20% 171 71%1.3 East Africa1.4 West Africa 48 8 16% 14 29%2. EUROPE: 162 96 59% 57 35%3. ASIA / PACIFIC: 62 24 38% 7 11%4. M.EAST 42 30 71% 0 0%5. N. AMERICA 23 0 0% 18 78%6. L. AMERICA 21 0 0% 7 33%TOTAL (Excluding Africa - see notes below): 310 150 48% 89 29%

1. Within North Africa region Egypt and Libya have unlimited capacity available2. Within SADC region Botswana have unlimited capacity available3. Within East Africa region Kenya, Ethiopia, abd Uganda have unlimited capacity available4. Within West Africa region Gabon has unlimited capacity available

Source: DOT 2006

High summer season from Oct to March – high frequencies and passenger numbers

Low winter season from April to Sept – low frequencies and passenger numbers

It takes up to 3 years to grow a viable route and seasonality makes it extremely difficult.

Some airlines only fly in summer eg.: Virgin/Air Berlin/Lufthansa

Airlines cannot optimise frequencies, 7 a week most preferred for economies of scale and lower cost per flight

Airlines can’t set up station office, station manager and own staff, has to appoint agents and may compromise their brand.

Seasonal Destination Challenges

INTERNATIONAL ARRIVING PASSENGERS BY MONTH

Cape Town is long haul destination and therefore airfares relatively expensive

Leisure Travellers fly once/twice a year and primarily in summer. Business Travellers more than once per year and all year round. Airlines makes 80% of their revenue from 20% of the seats up

front: Business/First Class Economy class seats (80%) yields on 20% of revenue Cant utilise cargo to cross subsidise flight cost as high value low

bulk cargo not existent in Cape Town. Agricultural and fish exports are shipped as it is too bulky and also

only in summer. South Africa’s business hub is Gauteng, hence most international

flights into OR Tambo.

Leisure Destination Challenges

Transport, on average, represents one third of the cost of a trip to South Africa

Source : SA Tourism Survey 2004

PAX FARE MIX - PREMIUM & ECONOMY 2 WAY PAX (000)

Source: ASM MIDT 2010

Distribution of Foreign Visitors

Percentage Distribution ofForeign Visitors by Region visited in South AfricaSource : Satour

Gauteng2006 47.8%2007 49.3%

Western Cape2006 20.7%2007 19.4%

Eastern Cape2006 6.6%2007 5.7%

KwaZulu Natal2006 17.1%2007 15.4%

Mpumalanga2006 14.1%2007 12.8%

Mpumalanga2006 7.8%2007 8.2%

North West2006 7.1%2007 6.7%

Northern Cape2006 3.5%2007 2.5%

Free State2006 9.8%2007 10.4%

What can be done?

Recognise seasonality as a major problem hampering tourism economic growth of the Western Cape

Promote and Position Cape Town and Western Cape as the “Creative Hub of Africa” to encourage business development opportunities and investment or as “Open for Green Business Developments”.

Promote and Position Cape Town and Western Cape as the an “All Year Round and a Responsible Destination”

Reduce investment in “summer” industries (agriculture/fishing) and Events like J&B Met, Argus Cycle Tour etc.

Increase investment and promote “Winter” Events and all year round industries.

Promote and invest in Business Tourism, i.e. conventions and conferences to develop an all year round destination.

Identify and encourage investment to manufacture of goods of high value /low bulk to increase airfreight

Devise and Airline incentive scheme to encourage international flight connections.

SOME SUGGESTIONS….

Recognise seasonality as a major problem hampering the tourism and economic growth of the Western Cape

Promote and Position Cape Town and Western Cape as the an “All Year Round and a Responsible Destination”

Reduce investment in “summer” Industries and Events like J&B Met, Argus Cycle Tour etc.

Increase investment and promote “Winter” Events and all year round industries.

Promote and invest in Business Tourism, i.e. conventions and conferences to develop an all year round destination.

Identify and invest in the manufacturing of goods of high value /low bulk to increase airfreight.

Devise and Airline incentive scheme to encourage international flight connections.

Organised Business, ACSA and Tourism Agencies