DTP Air Services Strategy

2. DTP Air Services Strategy

3. Air Services This focuses on the development of DTPC’s Air Services Strategy and it is supported by the DTPC Route Incentive Framework and comprises: • On going reviews of the air service strategy; • Annual review of IATA/PAX-IS passenger and fare data; • Presentation to airlines; • Negotiations with airlines to operate services to Durban; • Support to airlines once they have agreed to launch a new service, both during the planning and build-up to commencement of flights and once operations have begun, in a spirit of partnership Air services do not simply ‘happen’ once an airport opens. Hence, a Five Year Strategy has been developed • Recognizing that economic development is associated with the provision of air services and identifying that Durban lacked non-stop service to international destinations, DTPC developed an Air Service Strategy in 2006/7, even before physical work on the construction of KSIA had commenced. The Air Service Strategy identified which air services might be attracted and set out how they might be attracted • Implementation of that strategy commenced in September 2007, soon after the formal approval of KSIA and the breaking of ground on the site

4. Bi laterals • Since 1994 bi-laterals negotiated by South Africa increased from 22 to 105 • DTPC’s participation in the Bi-lateral Air Services Commission has resulted in 56 agreements reviewed to include Durban as a point of entry for International services. • Over the next 12 months DTPC will focus on reviewing the following Bi-laterals towards that will allow both passenger and cargo services to Durban with multiple designations ; UK; Germany; Holland; Turkey; Poland; Singapore; India; Australia; China; Hong Kong and Brazil. • In addition Bi-laterals with SADC countries will be reviewed to ensure increased frequencies in both passenger and cargo movements into Durban. These will include Zimbabwe; Angola; Botswana; Mozambique as well as Kenya. • Limited Open-Skies with 5th Freedom rights needs to be facilitated via NDOT with the following countries – Singapore ( South America); Australia ( DRC) and Brazil ( Angola). This added incentive will result in the increase in both passenger and freight into and out of KZN.

5. Route- Pro: Route Development Modelling • Based on software system by RDC Aviation • Sourced from IATA based cost modelling • Configured on Boeing; Airbus; Embraer; Bombardier design data • Derived from Roll Royce; Pratt & Witney; GE; Engine Alliance engine performance data • Provides approximate cost of route based on aircraft/engine type; design configuration; airline operational input costs; navigation/airport costs. • Utilised to negotiate with airline possible route incentive programme.

6. Route- Pro: Example

7. The Air Services Strategy • Initial examination of data found a substantial demand for international travel to and from the Durban area, from and to a large number of points around the world. Only a few though would be able to support profitable air services based only on the local demand between Durban and the point concerned. Hence, the strategy was to seek service to major global hubs so that passenger volumes on these routes could be boosted by passengers making connections at these hubs, with these services being best provided by the major airline based at each hub. • The ideal first airline and service was identified as Emirates, with its Dubai hub offering an extremely extensive range of onward connections to points world-wide, an added bonus being the reputation for high quality of service gained by this airline and hub. • The phased introduction of other routes was planned • In addition to these intercontinental routes, a range of potential destinations in southern and central Africa was also identified as part of our Africa strategy

8. Durban’s International Passenger Market • In 2011, some 915,000 international passengers started or ended their journeys in the Durban area, travelling to and from a wide range of destinations • This market has grown by more than 70% over the last five years since DTPC commenced its work • Despite this, only 20% of these passengers fly internationally to and from KSIA – most take a domestic flight to ORTambo and catch an international flight from there

9. The Emirates’ Success Story • Following the early identification of Emirates from Dubai as the first target service, the airline was pursued vigorously and flights commenced on a daily basis in October 2009 • The service attracted demand slightly in excess of our predictions from Day 1, and has continued to perform very well • Aircraft availability prevented Emirates from using a larger aircraft in Year 2, so growth moderated. However, in June 2012, the airline is changing from a 278 seat A330-200 to a 358 seat B777-300 with First Class for the first time • In addition to providing much needed international service to KSIA, the Emirates flight • Showed that the local market will support new services • Added credibility in the eyes of other airlines to our route projections by actual performance being slightly higher than we predicted • Demonstrated that direct air services stimulate demand: even though the total Durban market has grown strongly since 2006, local traffic between Durban and Dubai increased nearly 3 times as fast

10. The African Strategy • DTPC has also been implementing an African Strategy • For routes into SADC countries, we have developed a partnership with SA Express to base a fleet of 50 seat regional jets at KSIA: this is the ideal aircraft type to operate on these routes as it combines speed with a relatively small capacity thereby allowing a high frequency of service to be provided • KSIA needs to twin with a major Hub in Africa and Kenya has been identified as a significant point of transfer between East/Southern Africa; South Asia and the Far East. In this regard discussions with Kenyan Airways has been initiated with the view of introducing a daily service that will connect Durban with North Africa; the Indian sub-Continent; South East Asia. • When implemented this twinning will compliment the services to be introduced by SA Express into the SADC region. • Meetings with Game Stores; Checkers; Mr. Price; Bell Equipment; Defy and Illovo( all Headquartered in KZN and present in Lusaka; Harare; Gaberone; Lilongwe and Windhoek) are being convened with the view of using the planned direct services by SA Express in both the business travel and air freight. This will be rolled out as each route is activated.

11. DTPC-SA Express Partnership • SA Express establishes 2nd operational base at KSIA • Focus on developing service to SADC cities • Commercial:Lusaka-Harare-Windhoek-Gaborone-Lilongwe-Maputo-Luanda-Lumbabashi • Tourism: Livingstone-Victoria Falls-Pemba-Vilankolous • To be phased with a route per quarter subject to Route Rights awarded by NDOT • DTPC to support SA Express with a R30m Incentive Fund based on funding of airport costs per route for the first year of operation. • Costs made up of En-route Navigation; Landing/Parking; Aircraft Turnaround. • Negotiating possible agreement with Emirates for a feeder/network partnership with Durban as a connecting hub into/out of SADC. • SA Express feed into SADC will connect domestic passengers from PLZ; ELS and CPT. • Similarly Emirates to be fed from PLZ;ELS and CPT connecting out of Durban.

12. On-going Implementation Activity • It is undoubtedly true that DTPC’s efforts to attract more services have been adversely affected by the Global Economic Crisis which has set back our work by two to three years • There have been other less obvious hurdles: • The delay in the delivery of Boeing’s new aircraft, the B787, has not only meant that airlines do not have the ideal aircraft to serve Durban on intercontinental routes (very fuel efficient, only 250 seats, very good cargo capacity), but also this has created a shortage of long haul aircraft generally • International routes may only be operated with the permission of the two governments of the countries between which the flight takes place. Although a formal process for these permissions (traffic rights) exists, they can sometimes be restricted (e.g. there are currently only available rights for 3 flights weekly between all of RSA and Zimbabwe), and the current allocation process favours Johannesburg • Strong growth in 2011 has provided a good story for our airline meetings this year:

13. Co-ordination with Stakeholders • The Air Services division has developed a good relationship with the key drivers of business and tourism in the Province. Planning for all routes is being done in co-ordination with the Durban Chamber of Business ( Corporate and Business Travel); Trade and Investment KZN ( Trade and Commercial linkages):Tourism KZN ( Leisure Travel and Tourism/Hospitality Packaging) and Board of Airline Representatives (Foreign Carriers Association) • On the air freight sector route planning will include the airlines cargo division; the Freight Forwarders Association; the local Top 5 Freight Forwarders and Manufacturers/Exporters.

14. DTPC Charter Strategy • Charter Strategy focusses on Schedule and Ad-hoc services • KZN’s global trade relationship is based with the UK; Europe; Middle East; India and China. • DTPC Cargo strategy will focus on schedule cargo service from Frankfurt and Singapore as central continental points • Frankfurt will serve the UK; Western Europe; Eastern Europe and North Africa • Singapore will serve China; Japan; India and Australasia • The Asian service will focus on high value electronic products; clothing; automotive components from Japan and Korea • The European service will cater for automotive components from Germany; France and Italy; surgical equipment; pharmaceuticals and electronic products. • The Ad-hoc service will be irregular and un-scheduled • Instances of this service will be Toyota parts and components; shipments for Mr. Price and equipment and parts for ship repairs.

15. 29° South

16. Thank you