Docsity
Docsity

Prepare for your exams
Prepare for your exams

Study with the several resources on Docsity


Earn points to download
Earn points to download

Earn points by helping other students or get them with a premium plan


Guidelines and tips
Guidelines and tips

Turning Around the Poor Performance of SADC Airlines: Strategies and Analysis, Lecture notes of Marketing

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.

Typology: Lecture notes

2021/2022

Uploaded on 09/12/2022

aristocrat
aristocrat 🇬🇧

5

(5)

240 documents

1 / 215

Toggle sidebar

This page cannot be seen from the preview

Don't miss anything!

bg1
TURNAROUND
STRATEGIES
FOR
SADC
AIRLINES
WITH
SPECIFIC
REFERENCE
TO
AIR
ZIMBABWE
subm.itted
iTt
'fulfilmerd.
o-f.
the
regniremen.t
"far
the
degree
of:
MASTER
OF
COMMRRCR
irt
the
subject
TRANSPORT
KCONOKIC.~
at
the
f.JHIVKRSIT'l
OF
SOUTH
AFRICA
SUPERVISOR:
PROFHSSOR
t1
SH.MlIA
.JOINT SUPERVISOR: . PROFESSOR C A
SMUTS
MARCH
1998
pf3
pf4
pf5
pf8
pf9
pfa
pfd
pfe
pff
pf12
pf13
pf14
pf15
pf16
pf17
pf18
pf19
pf1a
pf1b
pf1c
pf1d
pf1e
pf1f
pf20
pf21
pf22
pf23
pf24
pf26
pf27
pf28
pf29
pf2a
pf2b
pf2c
pf2d
pf2e
pf2f
pf30
pf31
pf32
pf33
pf34
pf35
pf36
pf37
pf38
pf39
pf3a
pf3b
pf3c
pf3d
pf3e
pf3f
pf40
pf41
pf42
pf43
pf44
pf45
pf46
pf47
pf48
pf49
pf4a
pf4b
pf4c
pf4d
pf4e
pf4f
pf50
pf51
pf52
pf53
pf54
pf55
pf56
pf57
pf58
pf59
pf5a
pf5b
pf5c
pf5d
pf5e
pf5f
pf60
pf61
pf62
pf63
pf64

Partial preview of the text

Download Turning Around the Poor Performance of SADC Airlines: Strategies and Analysis and more Lecture notes Marketing in PDF only on Docsity!

TURNAROUND STRATEGIES FOR SADC AIRLINES

WITH SPECIFIC REFERENCE TO

AIR ZIMBABWE

subm.itted iTt 'fulfilmerd. o-f. the regniremen.t "far

the degree of:

MASTER OF COMMRRCR

irt the subject TRANSPORT KCONOKIC.~

at the f.JHIVKRSIT'l OF SOUTH AFRICA

SUPERVISOR: PROFHSSOR t1 SH.MlIA

.JOINT SUPERVISOR:. PROFESSOR C A SMUTS

MARCH 1998

weak:ciesses

thre~.ts,

i

tta.ree

UNISA

BIB! LIBRARY Cla~. Klas 658.40630968 (^) CHIN AccessAanwin ···y············

111111111111111

the

The

1..tl.

iii

h. Chief

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

CEO

CR

DC

DCA DH,.,.,,,. DC>C EAA ECA EL AL F H! IATP. ICf.J} .JAL KAL KLM LAM MD MI!

N/A Pan Am

Plc

PTK

iv

Fokker H1:!'akF.ft· Sid.-d.e le-y

Mot Avai lr..i.bie

vi

List of Fi@J..res

Lie.t of T~.bles---------------------------------------

IHTROIXJCTIOll------------------------------------

1-1 ~kgrrftHld to the Stl.lt'.b°---------------------

1-Ll LL LL 1- 1-

Globalisati<Jn---------------·---------

Limitatiun of tb.e StUt"ly--------------------

1-4 Objectives of the st.Ut".b'--------------------

Main objective-----~------------------

1_5 Metro.1dology^ Subsidia't'Y' _______________________________^ Objectives----------------- _

1-5-1 Airlira.es------------------------------

1-5- 1-5- 1-5- 1-5. 1-5_

DF.:pa:rl.me-clt r..;"f Ci.,1i l 1-..viat. irJn ( DCI-.. ) __ - -

IATA/AFRAA/AFCAC.---------------------

Co:mmm'licat iora.s Cr..nmaission {SA.Tee) •• - - -

l!r"..;r.1~- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - LS lbq.asi.i:.i.r..1Ta. o'f i'.. he !::;t.'Ol'.ly. ___ - - - •••••• - - - - - - - '1.'HKORY/LITKBA'TURK RKVIIDl.----------------------- 2-

2-2 Types of Turnarr.ro:nd Strategies-------------

2 - 3 Cr.1e.-t te~rlersh i1~ Strategy - - - - - - - - - - - - - - - - - - -

2_3_1 General-------------------------------

2_3_

2_3_

2_3_

2_3_

2_3_s

2_3_

2_4_

Pr<fllnctian Efficierar...7 ________________ _

~J.:trk.et/Se"C'Vice Efficiel'l'-"Y------------

Cr..16t Efficiear~"Y----------------------

Porter~s Cr..?..D;~titive Forces-----------

Risi"..s r..ri Cr.Jst U::arlership Strategy ___ - _

s~.'t".1- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Differera.tiatirJn Strat.. eg-.;_ - - - - - - - - - - - - - - - - - -

xi

lti.i

xiii

l l l 4 7 9

lfJ 13 13

17 19 19 19

24

30

42 43

44

Asia.n Airliries ......... ...

2.4 .. 5 F·orces.

2 .. 4 .. 6

  1. .. 4 .. 7 Diiie"!·e~r~t^ i.::s.:t.^ ir..rr1^ _ :::. 4. 8 2 .. 5 .. l ~3.e·r1e-!""~.^ l.^ ..^ ...^ ...^ ...^ ..^ ...^ ...^ ..^ ...^ ...^ ...^ ...^ ...^ ...^ ...^ ..^ ...^ ...^ ..^ ..^ -^ ...^ -^ ...^ ...^ ...^ ..^ ..^ ...^ ..^ .. Risks r,;f

2 .. f3 ... 4 e:c~l Oer..b~l.ct^ if'...rrts^ ..

3_ CASE STUDIRS OF "l.'Wf'} SUCCKSSFiJL: TURNAROUNDS AND A

British Ai:~ays ..

3 .. 2 ... 4 3 ... 2 .. 5

~^ Jt.j;", ....

A&:'.-.:;•....:"

r.-::i..,,,,_, 54 55

SB ~,-~ ( ..... 71

72 72 7~.....

'7"7< '

(J) • en^ ·:i^ ~ 5 i..,. s... •^ ~(

(J) • (J'I i' l (Q""::r....'O ....~~

(J) • ..... • ""3 t'l I""Q a.... l~ ~i.i j3I lQ" - tr'l ff ~~ <~ i(I! - ~ en

CD•..... • (J) Cl)it+ ~ ~ ~ CD

(J)•.....•C.'I Ff f ~ C.'I

en • .....•..... ti'lit+ t3,....., ,.,.g ~ .....

(J) • ~ • C..J Cl'l ~.... lQ"

(J) • ~ • f':I tr'l ~ ""~(0 q ~^

~^

(,.)

CD^

(J)

.^

, ~^

~

  • ....^

..... ~~ ~^

i

g :c+^

....

~^

f~

(J)^

(!) ,^

(,,)^

t-.)

~^ ~

~ m.

,, ti'lit+ ~it+ "'Q

r ~ i I"'• ~ ~ 11 ~ ill ~

~^

~;

.... m

v,,^

N^

CO

Cb ' (J)^

I^

C."^

C."

,^

,^

....^

(J)^

(.'I

r:^

I~

f

i^

~^

[

~^

S^

s S^

....^

EV ...^

en

•. I

I i,

~^

~^

~^

§

c.tt^

(J'I^

(J'I^

c.tt^

(.'I

,^

,^

,^

,^

~^

~^

~^

(,.)^

N

,^

,^

N^

....^

N ~^

to

r

l

J

~^

4r^

~^

i

Ig.... t+^ .... (IJ"^ ....C.'I(,.)

.... ~

~^

.^

~ j3I^

'^

LIJ

s·j3I...., .... ~

.... ~

....~ (..>

(ft '

C.'I^

(J'I^

(.'I^

....^

.....

,^

-^

,^

!Z^

'

N^

N^

i-^

tit^

~

~ • (J) i.... .... '

;.^

i^

r:^

I

f^

[^

i^

[

f^

>[-Im~

(IJ~p

''j

ti!^

-~^

'^

'^

~

"^

j3I^

,^

'^

c+

(IJ^

s·^

:^

:^

s

j3I^

,^

'^

~

~ ""'

.....

~

~pq i ~ ~·I tr'J ~ Ipr• ~.:,..,^

~

• ~•^ ~^ f':I^

....^ ~

iit+^ ....^ s;

~^

~^

~

.^

,^

(.'I^

~^

(,.) 'm

S!^

~ ~^

~ ~.^

~^

to

i^

~^

I

....^

, ~^

,^

~

UQ^

,^

~

l l ~~ i it+ fr ~ .... "",.,. 5

....^

.... ........~^

~

~^

""'^

.....

-^ -^

  • ~^

(,.)^

~

,^

,^

C.'I^

~^

.:,.., ~

OQ^

i 0

r

~ ~^

~.^

~

~^

5

....,^

co^

~ "":I ~^

~ ::r~ ,...^

(Q 0

f^

~

,....,.... (.'I

i [it+ &'l I~ it+ ........(.'^

~r

I"'· ~

SUHHARY,

S~ey .............................................................................. ..

7.3 Recammenr.latir.l['a.s •••••••.•••••••.•••••••••••••

BIBLIOGRAPHY ..•...•............. -----------------

xii

2.1 Fimmcial Perioravm.ce {in nominal "figures)

0£ Air Zi.mbat.Me 1981/82 - 1990/91------------- 21

2.2 SADCC National Airlines share 0£

intercrmtirw.mtal passenger tra££ic, 1987-89. - - -. 21

2.3 Average ~l remaneratian fr.Jr di££ere·nt

sta££ categr.n-ies r.J"f selected. airlines, 1988_ - • -

La.br"ftll' pror.hlr..-tivity, 1988----------------------

0perating reB11lts of some airlines "for the

1989 "financial year----------------------------

Passenger Yields on scheduled services, 1988. __ Passenger yields of lm-opean airlines on

ira:tenli!$.tir.J'nll..l services within lmrr.JPE:, 1989_ •• _

SIA Balarace Sheet as at 31 March 1992 arid

28 29

BS

3_3 Airlines prodnctivitY-------------------------- 98

3.4 Depreciatirsca. pr.Jlicies fr.J-r aircl:"aft., spa.res

and spare eragines------------------------------ 99

4.1 Projected SAl)(:::C fleet prr.J"files l.Xnder dif£erent

r..tptions,SADCC a1rl~ne 1996---------------------------------- £leet oamprJs1t~r.m,s ______________ _ 107

Age prr.Jfile 0£ tbe SADC airc-ra"ft. "fleet., 1991 ___ _

4.4 Tot.al regional a:viat.ir..m. tra££ic ira. SADf'.£

cOl.llltries 1986-89-------------------------------- 116

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

the ~..1orld"s t""C"a:ffic hr.i:ve r..:ollectively lr..1st.. aJ..-r.m:t us:i10 billio·n on

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),

the following examples will illustrate the widespread nature of poor

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.

job losses by the end of 1993 (Flight International 19 - 25 May

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

were severely affected by new low-cost operators who were allowed to

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

airlines ha"'.7e emel:·ged to fill the g~.p crea.ted tJY cr.mnecting these

·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) -