Critical success factors for airlines in Southern Africa

Abstract

The airline industry is structurally challenged by its very nature, facing high fixed costs, cyclical demand, intense competition and vulnerability to external shocks. This is exacerbated further by other endogeneous and exogeneous challenges in the operating environment, which make it difficult to operate airlines successfully. Consequently, structural, endogeneous and exogeneous challenges produce thin profit margins for airlines, thereby prompting airline managers to identify critical success factors to these challenges. However, operating airlines in southern Africa has proved to be fraught with difficulties resulting in several airlines terminating their services after short periods of operation, thereby disrupting travellers. The purpose of this research is to identify critical success factors to overcome challenges facing airlines in the region. A mixed-methods research design and an extensive literature review on critical success factors for airlines was employed, followed by several interviews with key personnel at eight southern African airlines. Purposive sampling was used to collect data from 54 respondents from eight different airlines. From the study, it is clear that the ability for airlines to survive financially is seriously threatened by organisational, industry, and environmental success factors. Within the organisation management inefficiency, labour inefficiency, use of aged fleets and management turnover significantly affected negatively the performances of state carriers, whilst alliances and the use of a standardised fleet significantly affected positively the performances of private airlines. The following environmental success factors namely, political, economic and technological factors, significantly affected negatively the performances of all airlines. Furthermore, national airlines received preferential treatment, which often distorted any prospect of a level playing field, thereby preventing privately owned carriers from competing effectively. The following industry success factors namely, rivalry amongst existing competitors, the bargaining power of suppliers and the bargaining power of customers significantly affected negatively the performances of airlines. As such, the following industry success factors were identified, namely the low threat of substitutes and new entrants, which are not enough to mitigate intense rivalry and the high bargaining power of customers and suppliers. Several suppliers can squeeze airlines, and even though the threat of new entrants is low, wherever there is potential, there will be new entrants, creating overcapacity and reducing yields. Consequently, to overcome challenges in the region the following organisational success factors were identified, namely management efficiency, the use of a modern fleet, fuel efficiency, labour efficiency, alliances, aircraft choice and customer satisfaction.