The airline industry in South Africa: drivers of operational efficiency and impacts

2018 ◽  
Vol 73 (3) ◽  
pp. 389-400 ◽  
Author(s):  
Oswald Mhlanga ◽  
Jacobus Steyn ◽  
John Spencer
Keyword(s):  
South Africa ◽  
Airline Industry ◽  
Operational Efficiency ◽  
Policy Implications ◽  
Load Factor ◽  
Content Type ◽  
Capital Costs ◽  
Block Time ◽  
Structural Drivers ◽  
The Impact

Purpose The airline industry is structurally challenged by its very nature, because of high overhead and capital costs. This is further exacerbated by macro-predictability and micro-uncertainty, thereby making it difficult for airlines in South Africa to attain operational efficiency. The purpose of this study is to identify drivers of operational efficiency and their impacts on airline performances in South Africa. Design/methodology/approach An extensive data collection using primary and secondary sources enabled the researchers to gather data on all the airlines operating in South Africa, for the period of 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 by using data envelopment analysis (DEA) and determination of performance drivers during the second stage by using a two-way random-effects generalised least squares regression and also a Tobit model. Findings From the study, it is clear that two structural drivers, namely, “aircraft size” and “seat load factor”, and two executional drivers, namely, “low cost business model” and “revenue hours per aircraft”, significantly impacted (p < 0.05) positively on airline efficiencies in South Africa. To improve efficiency, management should first concentrate on the drivers that can be changed in the short-term (executional drivers) and later focus on the drivers that require long-term planning (structural drivers). However, among the structural drivers, only “aircraft families” had a negative impact on airline efficiencies, whilst among executional drivers, only “block hours” negatively impacted on airline efficiencies. Research limitations/implications Despite the importance of this study, it is not free of limitations. Firstly, because of the small size of the industry, fewer airlines and lack of detailed data, the study could not consider other important factors such as optimal routing and network structure. Secondly, although non-aeronautical revenues have become increasingly important in airline management, they were not included in this study. Further studies may investigate the impact of these factors on airline efficiency. Practical implications The results have potential policy implications. Firstly, as the domestic airline market in South Africa is too small to operate with a smaller aircraft efficiently, airlines that intend to make use of smaller aircraft should first identify niche markets where they can have a route monopoly, such as SA Airlink. Secondly, as block time negatively affected airline efficiency, airlines can undertake schedule adjustments to reduce block time and thus improve technical efficiency. Originality/value This paper is a first attempt to identify drivers of operational efficiency in the airline industry in South Africa. The results indicate that DEA is a useful tool to identify factors impacting airline efficiency and could improve airline performances in South Africa.

Drivers of efficiency and their influence on airline performances in South Africa: a bootstrapped meta-frontier approach

2019 ◽  
Vol 14 (1) ◽  
pp. 121-135
Author(s):  
Oswald Mhlanga
Keyword(s):  
South Africa ◽  
South African ◽  
Airline Industry ◽  
Policy Implications ◽  
Niche Markets ◽  
African Government ◽  
Content Type ◽  
Political Interference ◽  
Run Up ◽  
The Cost

Purpose This paper aims to identify drivers of efficiency and their influence on airline performances in South Africa. Unfortunately, the methods currently used to measure airline efficiency fail to address the heterogeneity problem, which blurs inefficiency. Design/methodology/approach To remedy the heterogeneity problem, this paper adopts the meta-frontier framework to identify drivers of efficiency. The interesting feature of the model is that it ensures that heterogeneous airlines are compared based on one homogeneous technology. The model is tested using a panel data sample of nine South African airlines, which operated from 2015 to 2018. Findings The paper demonstrates that structural drivers, namely, “aircraft size”, and “airline ownership” and one executional driver, namely, “the cost structure” significantly influence (p < 0.05) airline efficiency thereby corroborating evidence from some prior studies. Research limitations/implications First, because of the small size of the industry, fewer airlines and a lack of detailed data, the study could not consider other important factors such as optimal routing and network structure. Second, a more rigorous analysis over a period of time would yield better understanding about the growth of the industry in South Africa and recognise the variation in the influence of drivers of efficiency on airline performances over time. Practical implications The results have potential policy implications. First, as the market in South Africa is too small to operate with a smaller aircraft probably, for airlines that operate with smaller aircraft to operate efficiently they should first identify niche markets where they can have a route monopoly. Second, while all state-owned airlines are perfect statehood symbols that define and represent countries, most state carriers in South Africa are highly inefficient. The researcher recommends policymakers to privatise state airlines or seek equity partners. Many nationalised airlines have turned losses to profits in the run-up to privatisation. British Airways, once a large burden on the British taxpayer, is now one of the world’s most efficient airlines. After the privatisation of Air France and Iberia, all two turned from loss-making concerns into profitable airlines. It, therefore, makes no sense for the South African government to expect state carriers to pursue a commercial mandate with such political interference. The very notion of efficiency itself is at risk. Originality/value This paper is a first attempt to identify drivers of operational efficiency using a bootstrapped meta-frontier approach in the airline industry in South Africa. By applying the meta-frontier approach the paper ensures that all heterogeneous airlines are assessed based on their distance from a common and identical frontier.

The impact of globalization on the performance of Banks in South Africa

2016 ◽  
Vol 26 (4) ◽  
pp. 517-542 ◽  
Author(s):  
Fadzlan Sufian ◽  
Fakarudin Kamarudin
Keyword(s):  
South Africa ◽  
Host Country ◽  
Banking Sector ◽  
Generalized Method Of Moments ◽  
Estimation Method ◽  
Bank Performance ◽  
Content Type ◽  
Multinational Banks ◽  
Dynamic Panel Regression ◽  
The Impact

Purpose This paper aims to provide empirical evidence for the impact globalization has had on the performance of the banking sector in South Africa. In addition, this study also investigates bank-specific characteristics and macroeconomic conditions that may influence the performance of the banking sector. Design/methodology/approach The authors use data collected for all commercial banks in South Africa between 1998 and 2012. The ratio of return on assets was used to measure bank performance. They then used the dynamic panel regression with the generalized method of moments as an estimation method to investigate the potential determinants and the impact of globalization on bank performance. Findings Positive impact of greater economic integration and trade movements of the host country, while greater social globalization in the host country tends to exert negative influence on bank profitability. The results show that banks originating from the relatively more economically globalized countries tend to perform better, while banks headquartered in countries with greater social and political globalizations tend to exhibit lower profitability levels. Originality/value An empirical model was developed that allows for the performance of multinational banks to depend on internal and external factors. Moreover, unlike the previous studies on bank performance, in this empirical analysis, we control for the different dimensions of globalizations while taking into account the origins of the multinational banks. The procedure allows us to test for the home field, the liability of foreignness and global advantage hypotheses to deduce further insights into the prospects of banking across borders.

How does ownership structure affect the financing and dividend decisions of firm?

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Tahar Tayachi ◽  
Ahmed Imran Hunjra ◽  
Kirsten Jones ◽  
Rashid Mehmood ◽  
Mamdouh Abdulaziz Saleh Al-Faryan
Keyword(s):  
Ownership Structure ◽  
Dividend Policy ◽  
Generalized Method Of Moments ◽  
Institutional Ownership ◽  
Agency Cost ◽  
Debt Financing ◽  
Policy Implications ◽  
Managerial Ownership ◽  
Content Type ◽  
The Impact

Purpose Ownership structure deals with internal corporate governance mechanism, which plays important role in minimizing conflict of interests between shareholders and management Ownership structure is an important mechanism that influences the value of firm, financing and dividend decisions. This paper aims to examine the impact of the ownership structures, i.e. managerial ownership, institutional ownership on financing and dividend policy. Design/methodology/approach The authors use panel data of manufacturing firms from both developed and developing countries, and the generalized method of moments (GMM) is applied to analyze the results. The authors collect the data from DataStream for the period of 2010 to 2019. Findings The authors find that managerial ownership and ownership concentration have significant and positive effects on debt financing, but they have significant and negative effects on dividend policy. Institutional ownership shows a positive impact on financing decisions and dividend policy for sample firms. Originality/value This study fills the gap by proving the policy implications for both firms and investors, as managers prefer debt financing, but at the same time try to ignore dividend payment. Therefore, investors may not invest in firms with a higher proportion of managerial ownership and may choose to invest more in institutional ownership, which lowers the agency cost.

Currency risk impact on the financial performance of multilateral banks

2015 ◽  
Vol 13 (1) ◽  
pp. 91-118
Author(s):  
Philip Kamau ◽  
Eno L. Inanga ◽  
Kami Rwegasira
Keyword(s):  
Financial Performance ◽  
Design Methodology ◽  
Regression Coefficient ◽  
Policy Implications ◽  
Stock Exchanges ◽  
Currency Risk ◽  
Content Type ◽  
Regulatory Status ◽  
The Impact ◽  
The Relationship

Purpose – The purpose of this paper is to investigate the impact of currency risks on the financial performance of multilateral banks (MBs). Financial performance is measured here by after-tax accounting profitability or losses. Design/methodology/approach – Quantitative hypothesis regarding the impact of currency risks on the financial performance of MBs was tested by a two-tailed t test for significance of the b regression coefficient. Findings – A regression analysis was done on the total currency risk and financial performance of MBs after taking into account currency risk over eight years. The analysis of variance of the regression of the b coefficient led to non-rejection of the null hypothesis of no association, F(1, 6) = 0.77, p > 0.05. The results of the two-tailed t test on the b regression coefficient suggest that the relationship between currency risk and financial performance is statistically insignificant. Therefore, it was concluded that there is no significant impact of currency risk on the financial performance of MBs. Research limitations/implications – The results of the study can be generalized only for MBs given their peculiar characteristics as wholesale banks, which are owned mainly by governments and are generally not listed on stock exchanges. Originality/value – The study is of value to those interested in the multilateral banking industry. To the authors’ knowledge it is the first study providing empirical evidence on currency risk impact on MBs financial performance. The study finds that the currency risk impact on the financial performance of MBs is insignificant. The results are also useful to managers of MBs in terms of benchmarking their effectiveness in managing currency risk compared to their peers and learn from better performers. It has also policy implications in terms of justifying the current self-regulatory status, shareholder monitoring and governance of MBs as they are not significantly impacted by currency risk as it appears to be effectively managed.

Intellectual capital: a determinant of firms' operational efficiency

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Kanishka Gupta ◽  
T.V. Raman
Keyword(s):  
Intellectual Capital ◽  
Stochastic Frontier Analysis ◽  
Stock Exchange ◽  
Stochastic Frontier ◽  
Value Added ◽  
Financial Sector ◽  
Operational Efficiency ◽  
Content Type ◽  
Frontier Analysis ◽  
The Impact

PurposeIntellectual capital (IC) has been recognized in improving the efficiency of businesses and gaining competitive edge in the developed world. The present study offers perspectives into the effect of IC on the efficiency of the Indian financial sector companies.Design/methodology/approachFor the purpose of evaluating efficiency, the research has used stochastic frontier analysis (SFA). All Indian financial sector companies listed in National Stock Exchange (NSE-500) for the timeframe of ten years (2008–2018) have been considered. The paper has employed modified Pulic's Value Added Intellectual Coefficient (VAICTM) as a proxy to measure IC. Correlation and panel data regression have been used in order to examine the relationship.FindingsThe results of the study indicate positive and significant relationship between IC and efficiency of the firm. The results also show that all the components of IC, that is, human capital, relational capital, process capital and capital employed have a significant impact on firms' efficiency. Additionally, it has been seen that sample companies do not invest in research and development leading to no innovation capital.Practical implicationsThe research will assist managers in managing and controlling the IC, investors in matters related to investment and financial experts in improving the company's IC and value creation.Originality/valueThe current research is one of the pioneering studies in the context of Indian financial sector that examines the impact of modified VAIC on operational efficiency calculated using SFA.

The elephant in the room of mutual forbearance

2018 ◽  
Vol 11 (2) ◽  
pp. 257-279 ◽  
Author(s):  
Burak Cem Konduk
Keyword(s):  
Airline Industry ◽  
Fixed Effects ◽  
Research Question ◽  
Fixed Effects Model ◽  
Content Type ◽  
High Performing ◽  
The Us ◽  
Mutual Forbearance ◽  
Low Performance ◽  
The Impact

PurposeThe purpose of this paper is to explain how a multi-market firm develops the motivation to forbear from competition.Design/methodology/approachA two-way fixed effects model with Driscoll and Kraay standard errors investigates the research question with panel data collected from the US scheduled passenger airline industry.FindingsThe results demonstrate that although the interaction of multi-market contact with strategic similarity impairs a firm’s forbearance from competition, the same interaction promotes it as firm performance deteriorates, supporting the hypotheses.Research limitations/implicationsPerformance explains not only how forbearance emerges out of coincidental multi-market contact but also reconciles the mixed evidence for the impact of the two-way interaction between multi-market contact and strategic similarity on forbearance.Practical implicationsAntitrust authorities should pay more attention to low performing firms than to high performing firms in their investigations. Also, managers of multi-market firms should identify multi-market rivals with low performance as targets for the initiation of forbearance.Originality/valueThis study revises the mutual forbearance theory to align it with the accumulating empirical evidence that otherwise refutes its assumption and thereby improves theory’s descriptive and predictive power.

The impact of FDI on human capital development in SACU countries

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Winfried Henok ◽  
Teresia Kaulihowa
Keyword(s):  
Human Capital ◽  
Secondary Level ◽  
Policy Implications ◽  
Supporting Evidence ◽  
Human Capital Development ◽  
Member States ◽  
Content Type ◽  
Level Of Education ◽  
Capital Development ◽  
The Impact

PurposeThis paper aims to examine how FDI trickle down to human capital development in SACU member states.Design/methodology/approachA longitudinal research design and feasible general least squares was used over the periods 1990 and 2018.FindingsThere is supporting evidence that FDI enhances human capital when primary school enrolment rate is used. However, the reverse holds for the secondary level of education. It can be argued that although FDI exhibits a positive effect on primary education, optimal spillovers to human capital development has not been realized. An indication that certain level of human capital may be required to ensure the optimal benefit of FDI or the types of current FDI does not enhance FDI-led-human capital hypothesis.Practical implicationsThe negative effect of FDI toward secondary level of education could be an indication of a weak absorptive capacity. SACU's current dominance of FDI activities toward extractive industries could limit potential benefit of FDI due to capacity constraints. Practical policy implications indicate that SACU member states need to ensure that it attracts FDI toward smart investment that enhances human capital development.Social implicationsThere is need to a gear FDI firms toward corporate social responsibilities that will stimulate secondary education.Originality/valueThe novelty of this paper is twofold. First, it focuses on SACU countries where majority of the people are trapped with poverty and inequality issues. Second, SACU member states have used greenfield FDI as a policy instrument to enhance human capital. However, human capital link remains weak. This creates a need to search for smart FDIs that are committed toward community transformation through human capital development.

Analyzing the Lean Six Sigma enabled organizational performance to enhance operational efficiency

2020 ◽  
Vol 27 (8) ◽  
pp. 2401-2434
Author(s):  
Shruti J. Raval ◽  
Ravi Kant ◽  
Ravi Shankar
Keyword(s):  
Organizational Performance ◽  
Six Sigma ◽  
Role Model ◽  
Operational Efficiency ◽  
Lean Six Sigma ◽  
Optimum Level ◽  
Content Type ◽  
Efficient Organization ◽  
Manufacturing Organizations ◽  
The Impact

PurposeThe aim of this analysis is to review the Indian manufacturing organizations practicing Lean Six Sigma (LSS) tools/techniques with an objective of monitoring the performance of an organization and to develop recommendation for strategies to benchmark organizational operational efficiency.Design/methodology/approachThis study offers insights of the LSS performance measurement aspects of the Indian manufacturing organizations based on Data envelopment analysis (DEA) approach. The five inputs and two outputs are considered on the basis of literature review and discussed with the practitioners.FindingsIn this analysis, the relative efficiency score of 18 Indian manufacturing organizations has been determined in order to assist evaluation of the impact of monetary investment on the outputs. The present analysis not only investigates the optimum level of input variables but also lays down a significant observation that an organization having higher profit and inventory turnover ratio is not necessarily an efficient organization.Practical implicationsThe results assist to determine the best practice units, potential source of inefficiency and deliver beneficial data for the consistent enhancement of the operational efficiency. The DEA results assist managers and decision makers to derive appropriate strategies to enhance their performance with reference to the efficient organization and to regard it as their role model.Originality/valueThis analysis renders a DEA based framework of LSS practicing Indian manufacturing organizations. The framework is unique in terms of its input-outputs variable selection and measurement procedure.

Appraisal of fire safety interventions and strategies for informal settlements in South Africa

2019 ◽  
Vol 28 (3) ◽  
pp. 343-358 ◽  
Author(s):  
Richard Shaun Walls ◽  
Rodney Eksteen ◽  
Charles Kahanji ◽  
Antonio Cicione
Keyword(s):  
South Africa ◽  
Fire Protection ◽  
Fire Safety ◽  
Informal Settlements ◽  
Content Type ◽  
Active Fire ◽  
Passive Fire Protection ◽  
Safety Interventions ◽  
The Impact ◽  
Broad Understanding

Purpose Informal settlements are inherently unstructured in nature, lack adequate services, regularly have high population densities and can experience social problems. Thus, fires can easily propagate rapidly through such areas, leaving thousands homeless in a single fire. The purpose of this paper is to present an appraisal of various interventions and strategies to improve fire safety in informal settlements in South Africa (globally, similar settlements are known as slums, ghettos, favelas, shantytowns, etc.), considering aspects of both technical suitability and social suitability. Design/methodology/approach This paper focusses on three specific aspects: ignition risk management, active fire protection interventions and passive fire protection interventions. These are presented within a framework to outline how they may mitigate the impact of fires. Findings Often “solutions” proposed to improve fire safety either lack a sound engineering basis, thus becoming technically inefficient, or do not consider social circumstances and community responses in settlements, thereby becoming practically, socially or economically unsuitable. It must be understood that there is no “quick fix” to this significant problem, but rather a combination of interventions can improve fire safety in general. A broad understanding of the various options available is essential when addressing this problem, which this paper seeks to provide. Practical implications This paper seeks to provide an overview to guide policymakers and organisations by illustrating both the advantages/benefits and disadvantages/challenges of the interventions and strategies currently being rolled out, as well as potential alternatives. Originality/value A broad but succinct appraisal is provided that gives insight and direction for improving fire safety in informal settlements. It is hoped that the challenges associated with the fire safety interventions discussed can be addressed and improved over time.

Social enterprises and organizational learning in South Africa

2018 ◽  
Vol 10 (1) ◽  
pp. 117-133 ◽  
Author(s):  
Boris Urban ◽  
Elena Gaffurini
Keyword(s):  
South Africa ◽  
Organizational Learning ◽  
Social Innovation ◽  
Emerging Market ◽  
Cross Sectional Study ◽  
Social Enterprises ◽  
African Countries ◽  
Cross Sectional ◽  
Content Type ◽  
The Impact

Purpose The purpose of this study is to determine the relationship between different dimensions of organizational learning capabilities (OLC) and levels of social innovation in social enterprises. Design/methodology/approach The empirical strategy adopted is a cross-sectional study based on primary survey data. Following a survey of social enterprises in South Africa, statistically analysis is conducted using regression analyses to test the study hypotheses. Findings The findings show that the OLC dimensions of knowledge conversion, risk management, organizational dialogue and participative decision-making all have a significant and positive relationship with social innovation. Research limitations/implications In many emerging economies, the notion of organizational learning appears to have considerable potential relevance, particularly as African countries are moving toward knowledge-based economies. By focusing on OLC, it is anticipated that social enterprises can configure and leverage the different factors in ways that enable them to overcome the constraints of the complex and unpredictable environments and increase their levels of social innovation. Originality/value The paper provides a pioneering empirical investigation into the impact that OLC has on levels of social innovation, in an under-researched emerging market context.

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