April 25, 2006

By AUDREY D’ANGELO

Cape Town - SAA is facing tougher competition from Virgin Nigeria on the key route between Johannesburg and Lagos.

The Nigerian airline, in which Virgin Atlantic has a 49 percent stake, announced yesterday that it was obtaining higher load factors since slashing the economy fare by 50 percent to R2 500 this month and increasing the baggage allowance for business and economy class passengers.

SAA had not cut its return fare of more than R5 000 by yesterday, with a senior executive saying its fares were decided "by market demand and not by the competition".

Virgin Nigeria's move challenges SAA's strategy to become the continent's dominant airline.

Africa contributed 16 percent of SAA's revenue last year. SAA said in its 2005 annual report that its Africa strategy was driven by increased commercial activity on the continent and high profit margins on African routes.

Mike Higgins, Virgin Nigeria's sales director, worldwide, said its business class on the route had normally been full, with passenger loads in economy class picking up. "The market from Lagos is different from that in Johannesburg. Demand, as in other parts of Africa, is more for business class than for economy and for a bigger baggage allowance."



SAA negotiated to become the strategic equity partner in the new Nigerian airline and develop Murtala Mohammed International Airport in Lagos as a hub for a network of west African and international routes, but was beaten to the deal by Virgin Atlantic Airways.

Higgins said Virgin Nigeria aimed to become the leading airline in Africa and had been applying for air-traffic rights to serve a growing number of international routes from Lagos.

It has applied for air-traffic rights to New York. This service will compete for west African passengers with SAA's service between Johannesburg and New York via Dakar.

Virgin Nigeria will increase flights from Lagos to London from three a week to daily at the end of this month and start a service to Dubai next month.

"We are not afraid to compete head-on with the world's leading airlines," Higgins said.

Meanwhile, SAA has announced that it would withdraw its flights from Johannesburg to Atlanta next month and increase the number to Washington from four a week to seven.