Sustainability of low-cost airlines within South Africa
Date
2017
Authors
Denga, Dumolwakhe
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Abstract
Based on the significant amount of entries and exits of low-cost airlines in the commercial airline industry within South Africa, this brought on the question of whether such business models are sustainable in an emerging market. Incidents such as the exits of 1time and Velvet Sky brought about a high degree of concern. Analysts have suggested that the main reasons for airlines departing are the global financial crisis in 2009 which led to a decrease in passenger numbers, decreasing market size, the volatility of the fuel price, route density on major routes, market size and currency risk. (1time Holdings, 2010; South African Airways, 2014; Comair Limited, 2014; Hedley, 2012). These factors are all external and indicate possible reasons for low-cost airline market exit. However, the business model of the airline is not considered as a possible reason for a low-cost airline’s exit from a market. Johnson, Christensen and Kagermann (2008) stated that the business model has four key components and, when these components are combined, they deliver value. These components are customer value proposition, profit formula, key resources, and key processes. Using the components provided by Johnson et al (2008) as a basis for the theoretical model, the study aimed to investigate key factors that enable or inhibit a disruptive innovation, such as a low-cost airline, in an emerging market like South Africa, and propose a conceptual model (that will be empirically tested in a subsequent study) for sustainability within the context of disruptive innovations, such as a low-cost airline, in a developing country setting. Five managers of leading low-cost airlines and airline consulting firms in South Africa were selected using judgmental sampling method and were requested to participate in separate individual in-depth interviews. The data from the interviews was analysed using the Glaserian coding method. Based on the data analysis, three themes were developed. These themes were: the business model, business model evaluation and external factors. From the themes, a conceptual model was developed. The model alleged that specific elements of the airline business model (the organisation, the product, costs and cash sources) have a possible influence on the competitive advantage of an airline while the competitive advantage of an airline has a possible contribution to its sustainability.
Description
A dissertation
presented to the
School of Economic and Business Sciences (SEBS)
University of the Witwatersrand
in fulfillment of the requirements for the Master of Commerce Degree (MCom)
June 2017
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Citation
Denga, Dumolwakhe (2016) Sustainability of low-cost airlines within South Africa, University of the Witwatersrand, Johannesburg, <https://hdl.handle.net/10539/24057>