Presented to:Africa Airports 2007

Johannesburg, South AfricaFebruary 2007

Presented by: John WeatherillDirector, Airline PlanningInterVISTAS-EU Consulting Inc.

Vancouver . Washington . Ottawa . Winnipeg . Chicago

Market Research & Air Service Development in Africa: A Strategic Approach

2

Presentation Outline

Why Air Service DevelopmentCurrent Africa Air Service SituationAfrica ASD Challenges & OpportunitiesThe Airline Planning ProcessInterVISTAS ASD Process• Market Research• Air Service Development Tactics• Airline Incentives

Summary

3

Why an ASD Program?

4

Why an ASD Program?

Air services drive airport revenues and regional economic developmentAirline planners require detailed, accurate information to make new route decisionsBut airlines do not have the resources to fully evaluate every marketA sound, well articulated business case, can convince airlines to introduce new air services

5

Africa Air Service Development: Challenges & Opportunities

6

Africa Air Service Situation

Large area, but relatively small market• Africa air travel is only 3% of world total

Various medium/large hub airports• Johannesburg, Cairo, Lagos, Nairobi, Addis

Ababa, etc.High proportion of non-African airlinesIntra-Africa travel can be difficultSignificant opportunity for expanded air services

7

Africa ASD Challenges

Local airline instabilityPolitical instability in some areasLower disposable incomeNegative perceptions of safety oversightRestrictive bilaterals• Failure to fully implement Yamoussoukro

Agreement• Bilateral liberalisation is critical

8

Africa ASD Opportunities

Greater encouragement of privately owned airports & airlinesMoves towards liberalisation of air bilaterals• Intra-Africa (Yamoussoukro)• Intercontinental (e.g., Morocco/Europe)

Tourism growth• Africa offers a unique tourism product

Above average growth of future air travel demand

9

Africa ASD Opportunities

10

The Airline Planning Process

11

Long Term Focus

Air service development is a long term, strategic effortCarriers focus on:• Short term (frequency/schedule adjustments)• Medium term (new routes)• Long term (new aircraft)

Fixed planning cycle - schedules finalized three to six months in before startupASD initiatives may range from six months to several years

12

Airport & Airline Objectives

Airlines will add service in order of expected profitabilityDifferent airlines pursue different strategiesAirports can move up the priority board with:• Solid research &

analysis(always)

• Incentives(sometimes)

PRIORITY ROUTE123456789

10

100

13

Airline Perspective

New routes are a risk to an airline• Airlines are more confident in forecasting

results on existing marketsAirline questions for new routes:• How much can I stimulate the market?• How will the competition react?• How much market share will I achieve?• What will be the connectivity contribution?• Will the new route be a financial success?

Airports can answer these questions and reduce uncertainty and risk

14

InterVISTAS ASD Process & Methodology

15

InterVISTAS’ ASD Process

A) Market Research• Required to quantify the true size of the existing air

travel market on an O&D basis

B) ASD Strategy• Deficiency analysis and detailed route analysis

C) Business Case• Packaging & presenting the information to airlines

D) Evaluate and Negotiate Airline Incentives• An appropriate incentive, in certain circumstances,

helps airlines commit to new air services

16

Market Assessment

1: Determine Catchment Area• What’s reasonable/realistic?• Drive time, ground access, air services, etc.

2: Quantify Market Size & Traffic Leakage• True origin/destination traffic by city pair• Traffic seasonality• Inbound/outbound ratios• Current routing patterns• Average airfares• Trip purpose (business, leisure, VFR)• Substitutable demand

17

A) Market Assessment

Government data• Quality varies

Global Distribution Systems• MIDT, IATA BSP, ARC• Exclude carrier direct/web sales• Declining coverage, MIDT is expensive

Survey research• Passengers, residents, travel agents, etc. • Very focused, but can be costly

Tourism data

18

A) Market Assessment

No one source is adequateCross check as many sources as possibleEstablishing accurate market data is an art form• It is not a straightforward process

Providing airlines with relevant, defendablemarket data is critical for ASD success

19

B) ASD Strategy

An ASD strategy is needed to • Identify viable air service opportunities• Co-ordinate limited resources• Focus on opportunities with greatest potential

for success

Route analysis is critical

20

B) ASD Strategy

1: Benchmark Air Services2: Identify Deficiencies3: Identify New Route Opportunities4: Identify Potential Air Service Providers5: Assess Viability of Potential Air Services6: Prioritize Route Opportunities and Target Carriers

21

C) Business CaseBusiness case should include all information airline planners require:• Catchment area profile: demographics,

economy, tourism, etc.• Airport profile: facilities, traffic• Market profile: market sizes, top city pairs,

traffic leakage, etc.• Suggested service: frequency, schedule,

aircraft, routing (double drop?)• Route analysis: market share, load factor,

stimulation potential, profitability, etc.• Strategic considerations

22

C) Business Case

Arrange carrier meetings to present business case• Consider planning cycles

Defend research and analysisFollow up and maintain carrier contact as required• Build a relationship with route planners• Provide updates as necessary

Negotiate and develop incentive package, if needed

23

D) Incentive Policy

Airports have become increasingly aggressive in pursuing new services

Airlines often demand risk sharing programs

Africa may be seen as a risky (unproven) market by some airlines

Incentives can be a good investment, if used properly

24

D) Incentive Policy

Are incentives appropriate?• Case-by-case basis

Three criteria to qualify• Air service must fill an deficiency in the

communityOtherwise the service won’t last

• Must reasonably be expected to achieve profitability in the short term

Two years maximum• Incentive must not discriminate against

incumbent carriersNo existing non-stops

25

Summary

26

Summary

Communities can influence the airline planning processAir service development requires • Sound market research• A clear and rational strategy• A solid business case

Airline incentives can accelerate the processThere is significant opportunity for the development of air services in Africa

Presented to:Africa Airports 2007

Johannesburg, South AfricaFebruary 2007

Presented by: John WeatherillDirector, Airline PlanningInterVISTAS-EU Consulting Inc.

Vancouver . Washington . Ottawa . Winnipeg . Chicago

InterVISTAS-EU Consulting24 Carillon CourtOxford RoadLondon, UK W5 3SXTel: +44 (0) 207 871 1809Fax: +44 (0) 208 840 5778Website: www.intervistas.com

Thank You