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Kulula

In: Business and Management

Submitted By idabarrie
Words 4442
Pages 18
EXECUTIVE SUMMARY OF CASE STUDY

Commercial Air Services (Pty) Ltd (Comair) operated as South Africa's first private airline since 14 July 1946. On 27 October 1996 a British Airways franchise agreement came into effect and Comair became known as British Airways Comair (BA). Comair remained a South African controlled company and in 1998 was listed on the Johannesburg Securities Exchange (JSE).

In 1999 the airline realised that there was a growing need for affordable air travel as the market had become seriously price sensitive. The economy had weakened at the time and travelling expenses had been cut.6 This realisation led to the launch of kulula.com in July 2001 as a separately branded Comair initiative: a South African low-cost, no-frills airline modelled on the successful European low-cost airline, easyJet. Kulula.com offered return flights between Johannesburg and Cape Town for as little as R800, three times a day, and received 2 000 bookings on its first day of operation.

The product offering was simple: easy online booking directly with the airline and affordable fares. At the same time, frills were kept to a minimum: tickets could not be changed once they had been purchased7; there was no pre-assigned seating8, frequent flyer programme or business-class; and food and drink were sold on board rather than distributed for free.9 By stripping costs out of kulula.com's operations and business systems, the airline was able to offer up to a 40% discount on a conventional airline ticket.

Research had found strong evidence to suggest that independent players did better in the low-cost segment because they were not bogged down by the systems and culture of the full-service airline. So, if kulula.com were to succeed it would had to make the most of the benefits of belonging to the Comair group but also transform its business model.

Several local and

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