The viability of the airline industry in Africa

Ngidi, Zanele Charles (2001-12)

Thesis (MBA)--Stellenbosch University, 2001.

Thesis

ENGLISH ABSTRACT: This study is concerned with the analysis of the factors that contribute to the viabililty of the airline industry. The viability of the airline industry in Africa is the subject of debate amongst African airline executives, governments and potential investors. The debate is a complex one because of the lack of reliable financial data from the airlines themselves. Governments are still financing airlines and it is therefore difficult to assess and evaluate airline viability on the basis of available financial information. This study project describes the industry as a whole, assesses the current situation and identifies an airline statistic that is closely related to airline profitability. The macro economic factors, social and political factors set the framework for the industry. The current situation does not look positive for Africa at that level. African governments, executives and airline organisations are aware of the problems, but an approach to addressing them is still the subject of discussion. The critical success factors of an airline revolve around the management of the balance between revenues and costs. In this case, the load factor was found to be a critical variable. The role played by the load factor in profitability is modelled using correlation and regression techniques. It could be established from the USA data that high regulation distorts the relationship between the load factor and profit. However, when the industry is deregulated and market forces determine the product, price and demand, the load factor has been found to play an important role. A break-even load factor was computed using the statistical techniques. This was then used as a basis for analysis. Although Africa meets the break even load factor, the trend is not improving in line with the America and Europe. It is recommended that the African airline industry need to improve its viability by deregulation, privatisation, forming strategic alliances and product development.

AFRIKAANSE OPSOMMING: Hierdie studiestuk behandel die oorsig van die faktore wat bydra tot die lewensvatbaarheid van die lugdiensbedryf in Afrika tans 'n onderwerp van bespreking tussen Afrika-Iugdiensverteenwoordigers, regerings en potensiele beleggers. Die debat word bemoelik as gevolg van die gebrek aan betroubare finansiële inligting van die lugdienste self. Meeste lugdienste in Afrika word deur regerings finansiel ondersteun en bedryf met die gevolg dat bedryfsresultate moeilik bekombaar is. Dit is dus moeilik om lugdienste se lewensvatbaarheid te bepaal as gevolg van die gebrekkige finansiele inligting. Hiedie studiestuk beskryf die lugdiensbedryf as 'n geheel, ontleed die huidige omstandighede en identifiseer lugdienstatistiek wat lugdienswinsgewendheid similleer. Die makro ekonomiese -, sosiale - en politiekefaktore wat die raamwerk vir die bedryf uitmaak, lyk op hierdie vlak nie positief vir Afrika nie. Regerings in Afrika, uitvoerende besture en lugdiens-organisasies is van hierdie probleem bewus, maar die aanspreeklikheid van hierdie probleem is steeds 'n onderwerp van bespreking. Die kritiese sukses faktore van 'n lugdiens rus om berus op die bestuur van 'n balans tussen inkomste en uitgawes. In hierdie geval is bevind dat die sitplekbesettingsfaktor die kritieke variant is. Die rol wat die sitplekbesettingsfaktor in winsgewingheidsmodelering speel, word deur korrelasie en regressie tegnieke weerspieël. Dit is uit Amerikaanse data vasgestel dat die mate van regulering van lugrederye in Afrika die verhouding tussen sitplekbesettings en wins, verwring. Sodra die bedryf gedereguleer word en markkragte die produk, prys en aanvraag bepaal, is bevind dat die sitplekbesettingsfaktor 'n meer verteenwordigende aanduiding van winsgewindheid weerspieel. Met die gebruik van statistiese tegnieke is 'n gelykbreek sitplekbesettingsyfer bepaal, wat hierdie grondslag van die analise is. Alhoewel lugrederye in Afrika die gelykbreek sitplekbesettingsyfer behaal, verskil dit van die verbeterende tendens in Amerika en Europa. Dit word aanbeveel dat die lugdiensbedryf in Afrika sy lewensvatbaarheid verbeter deur middel van deregulering, privatisering, vorming van strategiese bondgenootskappe, en die ontwikkeling van 'n beter produk.

Please refer to this item in SUNScholar by using the following persistent URL: http://hdl.handle.net/10019.1/49712
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