Airlines: Low-cost Carrier and Airline Industry
South Africa’s airline industry’s companies have been fighting to stay in the black over the past year, with SAA getting a R6bn recapitalization (which they claim is not a bail-out), new entrants like Velvet Sky not lasting a full 12 months in the industry and established low cost carrier company Kulula.com’s parent company Comair slipping into the red for the year ended December 2011 (Comair declares six-month loss amid rising costs, (n.d)). I will be discussing the macro-environmental forces that are affecting the domestic airline industry, with a focus on the South African industry. I will also analyse consumer behaviour in the low cost carrier market and the airline industry in general, by finding out what the main factors which influence consumers to choose one airline over the other are, with particular reference to Kulula.com. Then I will briefly propose a growth strategy for Kulula which will be able to help them grow by making use of knowledge gained from the investigation into the macro-environmental forces and consumer behaviour.
The main macro-environmental forces which are affecting the airline industry are economical, technological, and natural forces. Demographical and political forces have a smaller affect, however as will be elaborated on later, a significant affect nonetheless.
The economic recession has reduced spending across all industries, especially on luxuries. People fly around the country for business and pleasure, but with reduced disposable income many ‘holiday’ fliers are cutting back and businesses are finding alternatives to get their job done which doesn’t require people to meet in person (for example conference calls). The airline companies have thus been squeezed, with low numbers of customers, increasing costs and demand for lower prices from the consumers ( West, Edward. 2012). This is a result of a “combination of high fuel costs, an increase of 70% in airport taxes in October (2011), and weaker demand from cash-strapped
The main macro-environmental forces which are affecting the airline industry are economical, technological, and natural forces. Demographical and political forces have a smaller affect, however as will be elaborated on later, a significant affect nonetheless.
The economic recession has reduced spending across all industries, especially on luxuries. People fly around the country for business and pleasure, but with reduced disposable income many ‘holiday’ fliers are cutting back and businesses are finding alternatives to get their job done which doesn’t require people to meet in person (for example conference calls). The airline companies have thus been squeezed, with low numbers of customers, increasing costs and demand for lower prices from the consumers ( West, Edward. 2012). This is a result of a “combination of high fuel costs, an increase of 70% in airport taxes in October (2011), and weaker demand from cash-strapped
References: Kotler, Philip; Armstrong, Gary. 2010. Priciples of Marketing, 12th Edition. Pietermaritzburg. Pearson Education, Inc. Kulula Brand Information, (n.d) Smith, Nicky. 2012. Comair confident of return to profit. [Online]. Available at: http://www.bdlive.co.za/articles/2012/02/15/comair-confident-of-return-to-profit [Accessed 24/08/2012] Staisch, I West, Edward. 2012. State’s R6bn recap of SAA ‘no bail out’. [Online]. Available at: http://www.bdlive.co.za/articles/2012/05/15/state-s-r6bn-recap-of-saa-no-bail-out [Accessed 24/08/2012]