Determinants of passenger choice in the domestic airline industry in South Africa

317 Pages·2015·5.15 MB·English

by  Rose Luke

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How to cite this thesis
Surname, Initial(s). (2012) Title of the thesis or dissertation. PhD. (Chemistry)/ M.Sc. (Physics)/
M.A. (Philosophy)/M.Com. (Finance) etc. [Unpublished]: University of Johannesburg. Retrieved
from: https://ujdigispace.uj.ac.za (Accessed: Date).
DETERMINANTS OF PASSENGER CHOICE IN THE
DOMESTIC AIRLINE INDUSTRY IN SOUTH AFRICA

by
ROSEMARY-JANE LUKE

THESIS

submitted in fulfilment of the requirements for the degree

DOCTOR COMMERCII
in
TRANSPORT ECONOMICS

in the
FACULTY OF MANAGEMENT

at the
UNIVERSITY OF JOHANNESBURG

Supervisor: Prof J Walters
August 2015
DECLARATION

I, the undersigned, hereby declare that this dissertation entitled “Determinants of passenger choice
in the domestic airline industry in South Africa” is my own work and all the sources I have used have
been indicated or acknowledged by means of completed references. It is submitted in fulfilment of
the requirements for the degree Doctor of Commerce In Transport Economics at the University of
Johannesburg. It has not been submitted before for any degree or examionation at this or any other
university.

Rosemary-Jane Luke
August 2015
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ABSTRACT
When low cost carriers are introduced into domestic or regional scheduled air transport markets,
the effects tend to be profound. In most markets where they have been introduced, lower prices
have tended to lead to the stimulation of demand. As the scope of the market increases, so too does
the number of entrants in the market, resulting not only in higher levels of competition but also
lower prices and services. The success of the low cost model is indicated by the uptake in the air
transport markets, where low cost carriers sometimes account for as much as 50% of the total air
traffic movements. The presence of the low cost carriers is not necessarily a guarantee of success
and the market failure rates tend to be high. There are few countries in the world where the low
cost carriers’ market share is over 50%, which suggests that the legacy carriers are still offering
services that are valued by the customer. However, even though some of the legacy carriers have
managed to avert the threat from the low cost carriers, since the introduction of the latter, many of
the legacy carriers have amalgamated, reinvented their model or exited the market.
The high numbers of airline entries and exits from the market, the adoption of some of the low cost
strategies by the legacy carriers (and vice versa), the formation of strategic alliances with other
airlines as well as other service providers and the amalgamation of airlines are all characteristic of
the current air transport market and suggest that airlines are trying to establish their competitive
advantages in a changed competitive environment. The airlines that are most likely to succeed in
these types of markets are airlines that best understand the factors that drive their customers’
demand.
The research presented in this thesis considers the theory regarding passenger preferences when
deciding between legacy and low cost carriers as well as the service elements that customers
generally value in their appraisal of airline services. Based on this, the research sought to determine
the factors that determine passenger preferences in the scheduled domestic air transport market in
South Africa. This was considered from four perspectives:
 The impact of demographic features on airline selection
 The impact of travel behaviour and market familiarity on airline selection
 The impact of the purpose of travel on airline selection
 The impact of the service attributes on airline selection.
The results indicated, as was also reflected in the literature review, that each of these four areas
impact airline selection in different ways, thereby creating distinct markets for each of the airlines.
The implication is that customers react to airlines rather than airline models. When reviewing two
low cost carriers in South Africa, one was viewed as a ‘no-frills’ low cost model, whilst the other was
viewed as more of a hybrid model. Similarly, differences were detected between the ways in which
the legacy carriers were viewed, with one’s approach being traditional and demand driven by travel
agents and business contracts, whilst the other has adopted many of the low cost carrier traits,
whilst still offering a typical range of traditional legacy carrier services.
This research has provided a unique contribution to this field, being the first academic study to
comprehensively describe the factors that determine passenger preferences in the scheduled
domestic air transport market in South Africa.
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OVERVIEW OF SOUTH AFRICAN CARRIERS, AIRPORTS AND RELATED
TERMS

AIRLINES
1time Privately owned low cost carrier , now defunct
1time/ Global Airways Privately owned low cost carrier , potential market entrant
Airlink Privately owned legacy airline, in alliance with SAA and SAX
BA/Comair British Airways operated by Comair, privately owned legacy carrier
fastjet Privately owned low cost carrier , potential market entrant
FlySafair Privately owned low cost carrier , new market entrant
Interlink Privately owned low cost carrier , now defunct
kulula Low cost carrier owned by BA/Comair
Mango Low cost carrier owned by SAA
Nationwide Privately owned low cost carrier , now defunct
SA Express (SAX) Government owned legacy airline
Skywise Privately owned low cost carrier , potential market entrant
South African Airways (SAA) Government owned legacy airline
Velvet Sky Privately owned low cost carrier , now defunct

AIRPORTS
CIA Cape Town International Airport
DIA Durban International Airport, previously Durban’s main airport,
before being replaced by KSIA
JIA Johannesburg International Airport, now ORTIA
KSIA King Shaka International Airport, Durban’s main airport
Lanseria International Airport Secondary Johannesburg Airport, also referred to as Lanseria
ORTIA OR Tambo International Airport, Johannesburg’s main airport

OTHER TERMS
FSA Full service airline, used as an alternative to legacy airline (LC) in
figures and tables, to avoid confusion with the abbreviation for low
cost carrier (LCC)
Golden Triangle Johannesburg – Durban – Cape Town
LCC Low cost carrier
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TABLE OF CONTENTS

ABSTRACT ........................................................................................................ 3
OVERVIEW OF SOUTH AFRICAN CARRIERS, AIRPORTS AND RELATED TERMS ...... 4
TABLE OF CONTENTS ........................................................................................... 5
LIST OF FIGURES ................................................................................................ 10
LIST OF TABLES ................................................................................................. 13

CHAPTER 1: INTRODUCTION ............................................................................ 14
1.1. Background .......................................................................................................................... 14
1.1.1. Overview ............................................................................................................................. 14
1.1.2. Problem description ............................................................................................................ 16
1.1.3. Problem statement ............................................................................................................. 19
1.2. Purpose of the study ............................................................................................................ 20
1.3. Significance of the study ....................................................................................................... 21
1.4. Primary research questions and hypotheses ......................................................................... 22
1.5. Methodology ....................................................................................................................... 22
1.6. Scope and limitations ........................................................................................................... 24
1.7. Outline of study ................................................................................................................... 25

CHAPTER 2: A COMPARISON OF THE LEGACY AND LOW COST CARRIER
MODELS ......................................................................................... 27
2.1. Introduction ......................................................................................................................... 27
2.2. Distribution channels ........................................................................................................... 28
2.3. Networks ............................................................................................................................. 31
2.4. Routes ................................................................................................................................. 35
2.5. Aircraft fleets ....................................................................................................................... 39
2.6. Airports ............................................................................................................................... 43
2.7. Revenue management ......................................................................................................... 48
2.8. Seating arrangements .......................................................................................................... 55
2.9. Staffing costs ....................................................................................................................... 57
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2.10. Ancillary revenue streams .................................................................................................... 60
2.11. Conclusion ........................................................................................................................... 64

CHAPTER 3: FACTORS INFLUENCING CONSUMER PREFERENCES IN THE
AIRLINE INDUSTRY ......................................................................... 70
3.1. Introduction ......................................................................................................................... 70
3.2. Overview of the factors impacting passenger preference in the airline industry: a review of the
international full service vs low cost literature ...................................................................... 72
3.2.1. Overview of the literature reviewed ................................................................................... 72
3.2.2. Discussion of the reviewed literature ................................................................................. 81
3.3. Overview of the factors impacting passenger preference in the airline industry: a review of the
associated international literature ........................................................................................ 84
3.3.1. Overview of the literature reviewed ................................................................................... 84
3.3.2. Conclusion on associated studies ....................................................................................... 93
3.4. Overview of the factors impacting passenger preference in the airline industry: a review of the
South African studies ........................................................................................................... 94
3.4.1. Overview of the literature reviewed ................................................................................... 95
3.4.2. Discussion of the reviewed South African studies ............................................................ 100
3.5. Conclusion ......................................................................................................................... 105

CHAPTER 4: OVERVIEW OF THE SOUTH AFRICAN DOMESTIC AIR TRANSPORT
MARKET ....................................................................................... 111
4.1. Introduction ....................................................................................................................... 111
4.2. Role players in the domestic air transport market in South Africa ........................................ 112
4.2.1. Introduction ...................................................................................................................... 112
4.2.2. South African Airways ....................................................................................................... 113
4.2.3. BA/Comair ......................................................................................................................... 114
4.2.4. kulula ................................................................................................................................. 115
4.2.5. Mango ............................................................................................................................... 116
4.2.6. SA Express ......................................................................................................................... 116
4.2.7. Airlink ................................................................................................................................ 117
4.2.8. Recent market failures ...................................................................................................... 117
4.2.9. Potential newcomers ........................................................................................................ 120
4.3. Key players and routes ....................................................................................................... 121
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4.4. Trends in the domestic market ........................................................................................... 123
4.5. Conclusion ......................................................................................................................... 129

CHAPTER 5: RESEARCH METHODOLOGY ......................................................... 131
5.1. Introduction ....................................................................................................................... 131
5.2. Research Design ................................................................................................................. 132
5.3. Research Method ............................................................................................................... 133
5.4. Research Format ................................................................................................................ 135
5.5. Data collection methodology .............................................................................................. 136
5.6. Design of the survey instrument ......................................................................................... 138
5.7. Population and sampling procedures .................................................................................. 140
5.8. Data Analysis ..................................................................................................................... 144
5.9. Ethical considerations ........................................................................................................ 145

CHAPTER 6: PRESENTATION AND DISCUSSION OF RESULTS (PART A) THE
IMPACT OF DEMOGRAPHIC ELEMENTS ON AIRLINE SELECTION ... 146
6.1 Introduction ....................................................................................................................... 146
6.2 Description of the research sample ..................................................................................... 147
6.3 The impact of demographic elements on airline selection ................................................... 155
6.3.1 Gender .............................................................................................................................. 155
6.3.2 Age .................................................................................................................................... 158
6.3.3 Education .......................................................................................................................... 161
6.3.4 Employment status ........................................................................................................... 163
6.3.5 Income .............................................................................................................................. 165
6.3.6 Summary ........................................................................................................................... 168
6.4 Discussion of results ........................................................................................................... 168
6.4.1. Gender .............................................................................................................................. 168
6.4.2. Age .................................................................................................................................... 169
6.4.3. Education .......................................................................................................................... 171
6.4.4. Employment and occupation ............................................................................................ 173
6.4.5. Income .............................................................................................................................. 174
6.5 Conclusion ......................................................................................................................... 175
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CHAPTER 7: PRESENTATION AND DISCUSSION OF RESULTS (PART B) THE
IMPACT OF TRAVEL BEHAVIOUR AND BUSINESS TRAVEL ON
AIRLINE SELECTION ...................................................................... 178
7.1. Introduction ....................................................................................................................... 178
7.2. The impact of travel behaviour on airline selection ............................................................. 179
7.2.1. Frequency of travel ........................................................................................................... 179
7.2.2. Group travel ...................................................................................................................... 187
7.2.3. Booking method and check-in procedure ......................................................................... 189
7.2.4. Party responsible for booking and payment ..................................................................... 193
7.2.5. Summary ........................................................................................................................... 196
7.3. Discussion of results: travel behaviour ................................................................................ 196
7.3.1. Frequency of travel ........................................................................................................... 197
7.3.2. Frequent flier programmes ............................................................................................... 198
7.3.3. Group travel ...................................................................................................................... 200
7.3.4. Booking method and check-in procedure ......................................................................... 200
7.3.5. Party responsible for booking and payment ..................................................................... 202
7.3.6. Conclusion on travel behaviour impacts ........................................................................... 203
7.4. Business travel ................................................................................................................... 206
7.4.1. Presentation of results ...................................................................................................... 206
7.4.2. Summary ........................................................................................................................... 212
7.5. Discussion of results: Business travel .................................................................................. 212

CHAPTER 8: RESEARCH RESULTS (PART C) THE IMPACT OF SERVICE
ATTRIBUTES ON AIRLINE SELECTION ............................................ 214
8.1. Introduction ....................................................................................................................... 214
8.2. Description of basic results: main reasons for airline selection and attribute selection ......... 215
8.2.1. Main reason for airline selection ...................................................................................... 215
8.2.2. Attributes that have a direct impact on airline selection ................................................. 218
8.3. Main reasons for airline selection ....................................................................................... 220
8.4. Attribute selection per airline ............................................................................................. 225
8.5. Ratings of attributes ........................................................................................................... 230
8.6. Rankings of attributes ........................................................................................................ 233
8.7. Comparisons between main reasons and attributes ............................................................ 238
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8.8. Summary of results ............................................................................................................ 240
8.9. Discussion of results ........................................................................................................... 242
8.9.1. Main reason for airline selection ...................................................................................... 242
8.9.2. Airline service attributes ................................................................................................... 244
8.10. Conclusion ......................................................................................................................... 249

CHAPTER 9: CONCLUSIONS AND RECOMMENDATIONS .................................. 252
9.1. Introduction ....................................................................................................................... 252
9.2. Defining the problem: Overview of the literature ................................................................ 252
9.3. Research objectives ............................................................................................................ 255
9.3.1. Summary of results ........................................................................................................... 261
9.3.2. Comparison with literature review ................................................................................... 263
9.4. Conclusions, managerial implications and recommendations .............................................. 261
9.4.1. Overview ........................................................................................................................... 261
9.4.2. Mango ............................................................................................................................... 263
9.4.3. kulula ................................................................................................................................. 264
9.4.4. BA/Comair ......................................................................................................................... 265
9.4.5. SAA .................................................................................................................................... 266
9.4.6. All airlines .......................................................................................................................... 267
9.5. Research limitations ........................................................................................................... 268
9.6. Areas for future research .................................................................................................... 268
9.7. Conclusion ......................................................................................................................... 270

ANNEXURE A: SURVEY INSTRUMENT ............................................................ 272
WORKS CITED ................................................................................................. 275

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