Market Analysis of Low Cost Airlines in Sa

Topics: Airline, Low-cost carrier, Southwest Airlines Pages: 7 (2187 words) Published: September 28, 2012
Table of Contents

Actual and potential size of the industry
Market growth and Profitability
Cost Structure and behaviour of the industry
Distribution systems
Trends and development
Key success factors


Marketing analysis can help a business do one or more of the following: Gain a more detailed understanding of consumers' needs - marketing analysis can help firms to discover consumers' opinions on a huge range of issues, e.g., views on products' prices, packaging, recent advertising campaigns Reduce the risk of product/business failure - there is no guarantee that any new idea will be a commercial success, but accurate and up-to-date information on the market can help a business make informed decisions, hopefully leading to products that consumers want in sufficient numbers to achieve commercial success. Forecast future trends - marketing analysis can not only provide information regarding the current state of the market but it can also be used to anticipate future customer needs. Firms can then make the necessary adjustments to their product portfolios and levels of output in order to remain successful. Marketing analysis include but not limited to the 7 dimensions that i will be looking at below re: low cost airlines.

1. Actual and potential size of the industry
South African low cost industry consists of the following airlines: 1time:
Offers low-cost, single-class flights from Johannesburg to Cape Town, Durban, Port Elizabeth, East London and George, and from those cities back to Johannesburg

A no-frills carrier operated by SAA, Mango offers low-cost, single-class flights between Johannesburg, Cape Town Durban, Port Elizabeth, and Bloemfontein.
Offers low-cost, single-class flights between Johannesburg's OR Tambo International Airport and Cape Town, Durban, George, Port Elizabeth, and Nelspruit. The airline also offers flights from Johannesburg's Lanseria Airport to Cape Town, Durban, Port Elizabeth and George. Accessed on the 20 June 2012

Kulula’s customers are: Business people in small to medium sized business sector, Middle Management, Upper Management on leisure trips. 57% of travellers are 25-49 years. 40% are business travellers and 60 % are leisure travellers. (Cant, MC & Machado, R (eds). 2010:105) Potentially there is still a market that need to be penetrated, the Cape town to East London route, and Johannesburg to East London. Also the government has a plan for reviving the Umtata airport which potentially is going to increase opportunity for new entries to the airline industry and also opens up opportunity for the current airlines to expand their routes.

2. Market growth and Profitability:

Currently there are 3 strong competitors in the market : Mango, 1time, and Kulula. There is a significant price war amid the low cost carriers in South Africa. As a result of price wars that are currently taking place, the profit margins are being squeezed but profitability is still being reached through strong market presence and high volumes. The treat of new entrants is not very high, owing to the large amount of fixed costs that are required to enter this industry, as well as the low profit margins and high competition already present. Customer needs have changed and low-cost airlines are realising that to make it they should focus more on services that add value to the customer. E.g....(value products offered by Khulula)

The airline industry in general hasn’t performed very well last year. According to the mail and Guardian & Guardian, SAA and its low-cost operator Mango has warned that they would post a loss for the past financial year and have requested a R6-billion state recapitalisation. Listed airline operator 1time last month showed a R157-million loss for the year to December. For 1time this included withdrawing all flights from Lanseria Airport trimming management, implementing a more flexible flight schedule and adjusting...
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