M.Com. (Transport Economics) / In the past, air freight was generally a by-product of passenger orientated airlines in the sense that excess payload and unsold passenger seats were sold as air cargo space. In recent years, this trend has changed and it is observed that the air freight industry is increasingly becoming an industry in itself. The individual market share of scheduled international air freight operations within the air transport industry is currently approximately 35,8%. In South Africa, compared to the rest of the world, the historical development of air freight has been slower and confined primarily to the one national carrier (South African Airways (SAA)). The purpose of this study is, to firstly, determine the potential for growth in the air freight market within and outside South Africa. Secondly, to isolate and describe the factors within SAA which are sub-optimal and therefore have a negative impact on the development of the full potential of the air freight services of the carrier. The overall conclusion of the study is that the market for air freight within and outside of South Africa can be expanded significantly. This conclusion is dependent on the positioning and equipping of the freight division of SAA independently from passenger services, together with the provision of specialist knowledge and systems required for effective air freight management.

The dynamics of airline deregulation have resulted in significant changes in airline competition and network structure. This dissertation examines airline competition and network structures in the presence of low-cost entry in a deregulated environment. / The first chapter investigates the effect of low-cost entry on the equilibrium network choice of a monopolistic air carrier. This essay differs from previous analyses in that it incorporates asymmetric city sizes, and distances as a determinant of costs into the model. Numerical exercises illustrate that the threat of entry may result in an entry accommodating, an entry deterring or even an interlining equilibrium, depending on demand and cost conditions and on the level of fixed costs of connecting city pairs. In particular, when the demand in city-pair markets are identical and cities are equal distance apart, the monopolist restructures its network in an attempt to minimize the competitive effect of entry. If demands vary across city pairs and distance is a factor of cost, then the restructuring of the network may be an entry deterring strategy. The incorporation of distance not only influences the number of direct connections between city pairs but may also affect how city pairs are connected within the network. / In Essay Two the model is extended to a duopolistic airline market in which network structures are endogenously determined by the competition between two incumbent airlines; numerical exercises are then used to demonstrate how the threat of entry by a low-cost airline affects the network choices of these incumbent carriers. The main result of the essay is that, in many situations, incumbent carriers restructure their networks in order to compete with potential entrants. The results indicate that incumbents' response to the threat of entry depends on the potential entrant's cost advantage and on the fixed costs of connecting city pairs. In particular, if the fixed costs of connecting city pairs are low and the cost advantage of the entrant is significant then entry may not affect the network structure of incumbent carriers. However, at higher fixed costs at least one incumbent will adjust its network in an attempt to soften the competitive effect of entry. Furthermore, the numerical exercises show that the threat of entry not only affects the equilibrium network structure but may also result in one incumbent leaving the industry and the potential entrant actually entering. / Essay Three studies network competition and welfare implications in partially and fully liberalized transatlantic markets using the model developed in Essay Two. This essay illustrates some conditions under which the price and welfare effects of an open-skies agreement depend on the equilibrium network choice of the competing airlines. In particular, network choices of airlines may result in higher prices on some transatlantic routes and if pre-liberalized domestic markets are competitive price reductions on domestic routes could be negligible. Another finding is that the opening of transatlantic markets mainly redistribute airlines' market shares and as a result the expected increase in passenger traffic may not be realized.

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The study involves, describing the nature of the airline industry, especially in the African situation with some of its problems being high airfares and inaccessibility within the continent. In order to address these problems an analysis of the minimal operating costs and challenging factors affecting route costs needs to be carried out. The aim of the study was to develop from first principles, a cost model to calculate operating costs along any route in the African continent. The costing of an airline service is reviewed through existing literature and a compilation of the structure, components and their equations and default values was done. A model structure to calculate these operating costs on a route is set up, while data is analysed to provide inputs to the model. The model is then applied to carry out an analysis of the type of service provided in terms of costs and service quality. Africa specific data is then included in the model in terms of passenger trips and sector distances and these are embedded into the model. The main conclusion drawn from the study was that this model could be used to design optimally an airline service based on operating costs using existing passenger demand and sector distance. The model was applied to a route within Africa and results showing how smaller capacity aircraft even though limited by maximum range are the most economical to run along routes when the frequency of flights is high. / Dissertation (M Eng (Transportation Engineering))--University of Pretoria, 2006. / Civil Engineering / unrestricted

Thesis (MBA)--Stellenbosch University, 2003. / ENGLISH ABSTRACT: The emergence of low cost airlines (LCAs) has attracted attention from passengers, competitors, the public, and researchers alike. It seems prodigious that LCAs prosper in today's time of economic downturn and are therefore able to counter the industry's trend. lATA's member airlines have accumulated losses of $31 billion since the beginning of the new millennium. Furthermore, industry icons such as American Airlines and British Airways are fighting for survival while some, namely Air Canada, are on the edge of bankruptcy: a fate which others, like Sabena, have not been able to escape. However, the low cost business model has triumphantly entered the aviation market since the deregulation of the markets in the U.S. in 1978. Low cost airlines like Southwest Airlines and Ryanair not only achieve double-digit profit margins, but also have the highest market capitalisation of the industry. This thesis examines the reason for the success of LCAs in the U.S. and EU. LCAs operate with a much lower cost base than most carriers, especially the major hut-and-spoke (H&S) airlines. The low cost business model aims at increasing both aircraft and staff productivity. It also simplifies the sequence of operations workflow and pricing structure. The thesis gives special consideration to the cost structure of LCAs. The advantages of LCAs lie within the areas such as labour, seat density, and distribution. The second objective of this thesis is to evaluate the development of LCAs and consider the implications for the European transport industry. Whereas American LCAs have operated for more than twenty-five years, the boom of their European counterparts did not commence until the end of the 1990s. Ryanair and easyJet have growth rates of more than thirty percent. The author agrees with the expectations of aviation experts that LCAs will grow until they serve approximately a quarter of the market; hence, the business model of low cost is sustainable. However, only three to four low cost airlines will survive the fierce competition in Europe. / AFRIKAANSE OPSOMMING: Die dringendheid van lae koste lugrederye (LKL'e) het die aandag getrek van passasiers, mededingers, die publiek en navorsers. Dit is vreemd dat LKL'e floreer in die huidige ekonomiese afswaai en gevolglik die tendens van die industrie teenwerk. Lugrederye, wat lid is van "lATA" , het sedert die begin van die eeu verliese gelei van 31 biljoen dollar. Daar teenoor is industriele ikone soos die Amerikaanse en Britse lugdienste (American Airlines and British Airways) besig om te veg vir oorlewing, terwyl ander soos die Kanadese lugdiens (Air Canada) op die grens van bankrotskap is: 'n ramp wat sommige soos Sabena nie kon vryspring nie. Sedert die deregulering van die lugvaart in die VSA in 1978 het die lae koste besigheidsmodel egter die mark triomfanlik betree. Lae koste lugrederye soos SuidWes lugdiens en Ryanair ervaar nie alleen dubbel-syfer wins-marges nie, maar het ook die hoogste mark-kapitalisasie in die industrie. Hierdie verhandeling ondersoek die redes vir die sukses van LKL'e in die V.SA en E.U. LKL'e werk teen 'n baie laer koste basis as die meeste vervoerders, veral die belangrikste "hub-and-spoke" lugrederye. Die doel van die lae koste besigheidsmodel is om beide die vliegtuie en die personeel se produktiwiteit te verhoog. Dit vereenvoudig ook die volgorde van prosedures, werkvloei en prysstruktuur. Hierdie verhandeling gee spesiale aandag aan die kostestruktuur van LKL'e. Die voordele van LKL'e lê op die gebied van arbeid, sitplekplasing en verspreiding. Die tweede doel van hierdie verhandeling is om die ontwikkeling van LKL'e te evalueer en te kyk na die invloed op die Europese vervoer-industrie. Die Amerikaanse LKL'e word reeds vir meer as vyf-en-twintig jaar bedryf terwyl hulle Europese eweknie nie 'n opswaai voor die einde van die 1990's ervaar het nie. Ryanair en easy Jet het 'n groei getoon van meer as 30%. Die argument is dat volgens lugvaartkundiges die LKL'e sal groei totdat dit ongeveer 'n kwart van die mark bedien; daarom sal die lae koste model die beste oorleef. Nogtans sal slegs drie of vier van die lae koste lugrederye egter die hewige kompetisie in Europa oorleef.

Study project (MEcon) -- University of Stellenbosch, 2000. / ENGLISH ABSTRACT: This assignment explains the search for a mechanism that can increase tourism flow by improved utilisation of airline capacity. The inherent characteristics of air transport indicate that the industry is subject to low short term marginal costs and that it is very tempting to award discount tariffs for last minute bookings. The challenge to management is to attract new passengers with discount tariffs without loosing full tariff passengers. Travel clubs are one of the mechanisms that are utilised to achieve aforementioned objective. These clubs offer mainly discount tariffs on hotel accommodation, car hire and airline tickets to their members. The acceptability of a travel club that applies restricting measures such as for example short notice periods, adaptable depart and return dates and shortened lead times have been tested in the South African market. The majority of respondents surveyed were in favour of such a travel club. An important finding is that South Africans are prepared to travel in a chosen month but that the travel dates within that month are adaptable in exchange for discount tariffs. The research also indicate that the availability of funds was decisive in the decision to travel or not to travel over seas. In order to overcome this problem the introduction of a providence account is recommended as part of the travel club's products. The challenge for the travel club is thus to consolidate the demand and to match it with the excess airline capacity. / AFRIKAANSE OPSOMMING: Hierdie werkstuk beskryf die soeke na 'n meganisme wat toerismevloei kan verhoog deur die verbeterde kapasiteitsbenutting van lugvervoer. Die inherente kenmerke van lugvervoer toon dat die bedryf onderhewig is aan lae korttermyn marginale koste en dat die versoeking groot is om afslagtariewe vir op die nippertjie besprekings toe te staan. Die uitdaging vir die bestuur is om nuwe passasiers met afslagtariewe te lok sonder om voltariefpassasiers prys te gee. Reisklubs is een van die meganismes wat gebruik word om die voorgenoemde doelwit te bereik. Hierdie klubs bied hoofsaaklik afslagtariewe op hotelverblyf, motorhuur en vliegtuigkaartjies aan hul lede. Die aanvaarbaarheid van 'n reisklub wat beperkende rnaatreels soos, byvoorbeeld, kort kennisgewingstydperke, aanpasbare vertrek en terugkeer datums en verkorte leityd toepas, is in die Suid-Afrikaanse mark getoets. Die meerderheid van respondente in die ondersoek was ten gunste van so 'n reisklub. 'n 8elangrike bevinding is dat Suid-Afrikaners bereid is om in 'n gekose maand te reis, maar dat die spesifieke reisdatums in daardie maand aanpasbaar is in ruil vir afslagtariewe. Die navorsing toon ook dat die beskikbaarheid van fondse deurslaggewend is in die besluit om oorsee te reis of nie. Om hierdie probleem te oorkom word die instelling van 'n voorsieningsrekening aanbeveel as dee I van die reisklub se produkte. Die uitdaging aan die reisklub is dus om die vraag te konsolideer en dan af te stem op die oormaatkapasiteit van die lugrederye.