Factors impacting airline efficiency in southern Africa: a data envelopment analysis

Abstract

The airline industry in southern Africa has a notoriously high failure rate. The purpose of this study is to identify factors impacting airline efficiency in southern Africa. An extensive data collection using primary and secondary sources enabled the researcher to gather data from ten airlines in southern Africa, for the period 2012–2016, on a variety of parameters. A two-stage empirical analysis was carried out, which involved estimation of operational efficiencies during the first stage using data envelopment analysis, and determination of factors impacting efficiency during the second stage using a two-way random effects GLS regression and also a Tobit model. The findings reveal that, ‘aircraft size’, ‘seat load factor (SLF)’, ‘LCC business model’ and ‘revenue hours per aircraft’, significantly impacted (p < 0.05) positively on technical and cost efficiency of airlines. However, ‘aircraft families’ and ‘ownership’ negatively impacted on airline efficiencies. Since the market in southern Africa is too small to operate with a smaller aircraft efficiently, for airlines that operate with smaller aircraft to optimise SLF they should first identify niche markets where they can have a route monopoly. The findings could improve airline performances in southern Africa, and improve the regions’ potential for tourism growth and regional sustainability.