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Strategies to improve the economic and financial performance of SADC airlines, specifically Air Zimbabwe. Through literature research, the study aims to determine weaknesses, strengths, opportunities, and threats to SADC airlines and derive practical turnaround strategies. The McKinsey 7-S framework is employed to analyze the internal environment of SADC airlines, highlighting the need for human resource development, market/service efficiency, and policy changes.
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subm.itted iTt 'fulfilmerd. o-f. the regniremen.t "far
irt the subject TRANSPORT KCONOKIC.~
at the f.JHIVKRSIT'l OF SOUTH AFRICA
weak:ciesses
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BIB! LIBRARY Cla~. Klas 658.40630968 (^) CHIN AccessAanwin ···y············
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the
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iii
i. Ms Beverly Bennett.,. British Airways Manager for Zimbabwe., Angola and Mozambique. j. Mr D Matikiti.,. Quality Assurance Manager.,. Air Zimbabwe Corporation.
k. Mr M Madders.,. retired director of the Department of Civil Aviation.,. Zimbabwe.
l. Mr^ G^ Konate.,.^ Technical^ Director.,.^ African^ Airlines Association.
I would like to thank my super,~·isor.,. Professor M Shahia and joint Sl.lpervisor.,. Professor (.': A Smuts, for thei!" interest., guidance and direction throughout the study.
APK ATK B BAe
DCA DH,.,.,,,. DC>C EAA ECA EL AL F H! IATP. ICf.J} .JAL KAL KLM LAM MD MI!
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IHTROIXJCTIOll------------------------------------
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IATA/AFRAA/AFCAC.---------------------
l!r"..;r.1~- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - LS lbq.asi.i:.i.r..1Ta. o'f i'.. he !::;t.'Ol'.ly. ___ - - - •••••• - - - - - - - '1.'HKORY/LITKBA'TURK RKVIIDl.----------------------- 2-
Cr..16t Efficiear~"Y----------------------
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SUHHARY,
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BIBLIOGRAPHY ..•...•............. -----------------
xii
La.br"ftll' pror.hlr..-tivity, 1988----------------------
Passenger Yields on scheduled services, 1988. __ Passenger yields of lm-opean airlines on
28 29
BS
3.4 Depreciatirsca. pr.Jlicies fr.J-r aircl:"aft., spa.res
Age prr.Jfile 0£ tbe SADC airc-ra"ft. "fleet., 1991 ___ _
4.4 Tot.al regional a:viat.ir..m. tra££ic ira. SADf'.£
4.5 Tr.Jtal int.ercrsca.tiriF.:l'a.tal aviation tra'f£ic <.Jf SADCC cr.santries 1986-89-------------------------- 116 5.1 Air Zimbabwe Corpi"'.J?a.tian &larace Sheet as at 30 .June 1991---------------------------------- 137 5.2 Intercontinera.tal fares between Saathern A"f rica arl.f'l Im-ope _______________ - - ______ - - - - - - - _ - 14E)
xiii
A Freedr.ADB of the Ai? (^201)
Genera.lly,. the pei:·fr.Jt~:nce <Jf r.i.b:·lines ii'fJ.11 over the world. in the pa.st foll'r· yee:rs r..1r sr.; { 1990 - 1993} has bee·n dismaL Th.is is the Cii'fJ.Se with
11nder the previm.lf:i bila.teral structure a.s ex~~la.ined. below.
20-21) ex:plr.s.irl.B tha.t i!i.irlines i"L1 the U8A have
becr.Jming pi:·ec.:1:l·imJS. A simila:r· sit"'l3J!S.tir.tn wa.s sa.id tr.; ha.ve emerged in Ga.na.r.lr.J.. Losses or ba:nkrl:r.pt..cies were reported. i·r, Austra.lia. a:nrl Mew Zea.land. All these .:1.irli"t1es a:re i".J"l" were f"t·ou, r..:r.JU"ntries which ha.ve
Perfo"Z:""ttia:nce of r.d-rlines in those r.;i:,'1.ratries whei:·e the P?:'F.:r•.rious bila.tera.1 f".-tructu:re still exists wr.i.s sirrtilarly ba.d. According to Pocock ( 1993a. :: 8) the 208 members r_,f IATA which ca.rr:y 96 per Cl:mt of
fun.ong the rea.so·ns for the l-:-..1sses wa.s the Gulf wa:r· a:nd the o"Ubseque·nt
Although some airlines such as British Airways and Singapore International Airlines made some profit in 1990-1993 (see Chapter 3),
financial performance of world airlines.
a. In the first half of 1993, the Austrian flag carriers~ losses were US$29 million., more than double from the previous year,
1993 :: 27}~
b. Lufthansa had accumulated losses of nearly US$200 million for two years from 1991-1993 (Aerospace - May 1993 :5).
c. Air France had accumulated deficits from 1990 of 450 million pounds {Sterling)~ of which 320 million pounds was in 1992. A heavy loss was expected in 1993. This is despite the fact that Air France receive Government subsidies {Aerospace - March 1993:6).
d. TAP - Air Portugal was estimated to make losses of up to US$ million for 1992 calendar year. In April 1993~ the airline was unable to pay the full salaries for all its 10 000 employees {Flight International 19 - 25 May 1993 : 21).
e. Air Canada reported a net loss of (.'$~'93 million {US$230 million') for the first quarter of 1993. The Airline had plans to make a major corporate re-organisation~ which could result in up to 1.
1993 : 20).
f. Quantas made a net loss of A$377 million {US$250 million) for the l'"ear to 30 June 1993~ after writing off costs of absorbing Australian Airlines {Flight International 3 - 9 November 1993 :
The air transport industr?l is undergoing profound changes throughout the World due to the abandonment of the fundamental assumptions about the need for regulation. There is a body of thought. that suggests that the protection which the industry received b~· regulation was unnecessary and that it has~ in fact~ worked against the industry·s own longer term interests. The^ argument^ is^ that^ by being protected~ the industry did not see the need to respond to free market forces leading to inefficiency and waste. Tariffs were kept unnecessarily high keeping traffic levels down (Doganis 1992:51-52}.
Deregulation started with the United States domestic operations in 1978 followed by countries such as Canada, the UK, Australia and New Zealand (Wheatcroft 1990:240'). This resulted in rela..~ation of controls over tariffs, capacity and market aCC"ess.
One result of deregulation has been the emergence and domination of the market b1r a small number of '¥'ery large airlines or ·mega- carriers· in the USA as a result of mergers and takeovers. An oligopolistic industry with four airlines carrying over 90 per cent of the passenger traffic emerged (Wheatcroft 1992:1). Many airlines in the USA have gone bankrupt. Examples are Braniff whose operations
compete for traffic on their more profitable routes {Transport Tutorial Association 1984: 109). A more recent example is Pan AM which went into liquidation.
5
a.s to concentra.t..e theil:· resrft.l.rces a.nd efforts on rm.:tt..es which they a.re more p:c·oper ly e<;flJ.ipped to sel:"J'e, '-1:c1rl o·n whir..:h they fa.ce theil:· gz·e;:,.test coui:petition (T-!·a:nE..-pr..srl Tutorial Associatir..sn 1984 :: 110). As a. result of th.is, same cr,;mrro.xclities "o11ith a. lm~ t..'l"a.ffic level b.o.ve beern separated Som.e E.r-riib.lle-"!" feerler
·netwo-z:·k.s.
Many see deregulation as being in the interests of the consumer since tariffs are generally lowered, the choice of carriers is wider and many routes have been opened up in the era of free competition.
From USA,. Canada,. the United Kingdom,. Australia and New Zealand,. deregulation has spread to Europe and Asia. Moves towards deregulation have been slow to be adopted in Africa. South Africa deregulated its domestic operations and domestic d·eregulation is under consideration in India (Wheatcroft 1992:1). In international operations,. South Africa,. like all SAilC countries as well as other African countries adopt protectionist attitudes {Brits and Smuts 1992: 41) -
