Determinants of Growth and Profitability of the Aviation Industry
Date
2023
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
University of the Witwatersrand, Johannesburg
Abstract
Despite the recent decrease in growth rates, there has been a significant growth in the airline industry over the years which is evident in the increase in the number of passengers and networks before the Covid-19 pandemic, thus making the growth attributable to the increase in people’s propensity to fly. In this study, the performance of airline industries is measured in terms of the growth rate and the profitability for each region within emerging markets, namely: Africa, Asia-Pacific, Middle East, Latin America, North America and Europe. Due to a constraint in data availability, the duration of interest is between 2009 and 2017, thus excluding the effects of the covid-19 pandemic which took place in 2020.
The problem this study addresses is the discrepancy identified between the growth statement made in the global context and what has been observed in emerging markets. This is done by assessing how some of the determinants that have been reported in the literature to fuel growth and profitability, affect airline companies and by investigating the relationship between the profitability and growth of airline companies in the context of emerging markets.
Three different methods were used to achieve the research objectives of this study, namely: correlation, Granger causality and regression analysis. In response to the first research question, it was found that oil price fluctuations, GDP, passenger yield, size and liquidity have an effect on the growth of airline companies in emerging markets while only liquidity and fleet size to a smaller extent, have an effect on the profitability thereof. In response to the second research question, it was found that there is no significant relationship between the growth and profitability of airline companies in emerging markets.
The recommendations made in the study include using a dynamic panel approach for any further research in order to increase the robustness of the study and to reduce any issues associated with endogeneity. In terms of policy and/or management recommendations, depending on the management strategy in place, the determinants should be prioritizedbased on whether the chosen business model is in pursuit of growth or profitability since the study has shown the relationship between these to be insignificant for airline companies in emerging markets
Description
A research report submitted in partial fulfillment of the requirements for the degree in Masters of Management in Finance and Investments in the Faculty of Commerce, Law and Management Wits Business School University of the Witwatersrand Johannesburg, South Africa, 2023
Keywords
Airline Companies, Growth, Profitability, Emerging markets, UCTD
Citation
Sepeng, Reabetswe Tiisetso . (2023). Determinants of Growth and Profitability of the Aviation Industry [Master’s dissertation , University of the Witwatersrand, Johannesburg]. WireDSpace.