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Tourism and Hospitality Research

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Impacts of the macro environment ! The Author(s) 2018
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DOI: 10.1177/1467358418771442
Africa: Management perspectives journals.sagepub.com/home/thr

Oswald Mhlanga
School of Hospitality and Tourism, University of Mpumalanga, Mbombela, South Africa

Abstract
Due to the nature of the airline industry, the performance of airlines is generally affected by a combination of
macro-predictability, micro-uncertainty and macro environmental factors. However, airlines in southern
Africa have struggled to identify strategies to overcome these challenges resulting in a high failure rate.
The purpose of this study is to identify the impacts of the macro environment on airline performances in
southern Africa. A quantitative method research design was followed. Structured survey questionnaires were
distributed at selected airlines to 154 key airline personnel. In order to reach the objectives of the study,
exploratory factor analysis was used to identify the underlying dimensions of macro environmental factors
impacting on airline performances. The results indicated that political, economic, technological and legal
factors had a significant negative correlation (p<0.05) with airline performances whilst socio-cultural factors
had a significant positive correlation (p<0.05) with airline performances. From the study, it is clear that the
increased cost of operating airlines, government interference and overprotection of state carriers, increased
competition (due to technology) and restrictive bilateral air service agreements have negatively affected
airline performances in southern Africa. However, changes in passenger profile and a rise in the black
middle class have positively affected airline performances. Partial and selective deregulation designed to
maintain the protection of state carriers represents a considerable threat to private operators something that
stifles the region’s tourism prospects. To improve airline performances, southern African governments must
create a level playing field for private and state carriers.

Keywords
Southern Africa, airline performances, tourism, air service agreements, private airlines, state carriers

Introduction
macro environment on their performances (Maqutu,
Airlines generally suffer from predictable, seasonal fac- 2015) resulting in several airlines terminating their
tors and unpredictable, individual customer demand services after short periods of operation (Steyn and
which make it difficult to attain operational efficiency Mhlanga, 2016). As a result, southern Africa has
(Campbell, 2014). This is further exacerbated by one of the highest airline failure rate compared to
vulnerability to macro environmental factors such as other regions in the world (Smith, 2015). Therefore,
political and economic factors (Doganis, 2013). various scholars (Ssamula, 2012; Roese and Smith,
Consequently, a combination of macro-predictability, 2015; Steyn and Mhlanga, 2016) have long pondered
micro-uncertainty and macro environmental factors
produces thin profit margins that prompt airlines to
identify strategies to overcome the impacts of the
macro environment on airline performances
Corresponding author:
(Ssamula, 2014). Oswald Mhlanga, School of Hospitality and Tourism, University of
However, airlines in southern Africa have struggled Mpumalanga, Private Bag X11283, Mbombela, 1200, South Africa.
to identify strategies to overcome the impacts of the Email: [email protected]
2 Tourism and Hospitality Research 0(0)

the enigmatic question of why southern Africa has According to PWC (2016) air transport plays an
become an airline graveyard. important role in the growth of southern African coun-
According to Duvenage (2016), identifying macro tries, whose economies are geographically isolated and
environmental factors impacting airline performances sometimes landlocked. To illustrate this, in 2015
could be the starting point to unlock the industry’s air transport contributed 3.5% to South Africa’s
financial challenges. Research confirms the impor- GDP (Statistics South Africa, 2016), 2.6% to
tance of macro environmental factors on the perfor- Zimbabwe’s GDP (Zimbabwe Tourism, 2016) and
mance of airlines (Barros and Wanke, 2015; Doganis, 3.2% to Botswana’s GDP (Statistics Botswana,
2013; Heinz and O’Connell, 2013). The macro 2016). The tourism spin-off is even more significant
environment is made up of uncontrollable factors because approximately 20% of all tourism-related jobs
that affect the organisation on a long-term basis, and in southern Africa are supported by international visi-
these factors may not have a direct impact on the daily tors arriving by air (WTTC, 2016). As a consequence,
operations of the organisation but will indirectly influ- due to air transport, in 2015, tourism contributed 9.4%
ence it (Maqutu, 2015). Therefore, an understanding to South Africa’s GDP (Statistics South Africa, 2016),
of the macro environment is crucial to the survival of 8.5% to Botswana’s GDP (Statistics Botswana, 2016)
airlines (Duvenage, 2016). and 5.2% to Zimbabwe’s GDP (Zimbabwe Tourism,
This article offers increased insight into the impacts 2016). Therefore, air transport is indispensable for
of the macro environment on airline performances in tourism (Campbell, 2014).
southern Africa. In spite of the growing international Although more than 40% of international tourists
interest on the impacts of the macro environment now travel by air, up from 35% in 1990, the profitabil-
on airline performances, limited research has been ity of airlines in southern Africa has plummeted to
completed on this topic in southern Africa. unprecedented low levels with all national carriers
International studies on the impacts of the macro envi- struggling with colossal losses, whilst private airlines
ronment on airline performances might not be appli- tend to have a very short lifespan (Ssamula, 2014).
cable to the southern African context, since Heinz and The collapse of carriers such as Zambian Airways,
O’Connell (2013) emphasise that the impacts of the Flitestar, 1Time and Fly Africa underscores the grim
macro environment on airline performances should financial reality that the industry faces in southern
be interpreted in the light of their regional context Africa (Smith, 2015). Therefore, to halt the industry’s
and should not be generalised to other regions. downward financial spiral there is a need to constantly
The contribution of the research on which this arti- and systematically scan the impacts of the macro envi-
cle reports is unique in that, for the first time, ronment on airline performances in the region
the impacts of the macro environment on airline per- (Mulder, 2015).
formances were investigated from the context of
airlines from the same region in developing countries.
Given the importance of air transport to tourism, Impacts of the macro environment on
research within this context is necessary. The theoret- airline performances: A literature review
ical contribution relates to critically articulating airline An understanding of the macro environment is crucial
performance from a developing context, where such to the survival of airlines as it affects their performances
findings could mirror similarities and differences and (Tesfay and Solibakke, 2015). Various frameworks have
inform airline executives of strategic implications been developed to analyse macro environmental factors
which could be useful for operational and manage- that affect airline performances. One such example
ment endeavours. used by various scholars (Barros and Wanke, 2015;
Doganis, 2013; Heinz and O’Connell, 2013) is a
Theoretical background PESTEL (Political, Economic, Socio-cultural,
Technological, Environmental and Legal factors)
Air transport plays a vital role in global, regional and
framework, which is discussed below.
national economies (Campbell, 2014). The World
Travel and Tourism Council (WTTC, 2016) reports
that air transport generates a total of 32 million
Political factors
jobs globally, through direct, indirect, induced and Political factors relate to the pressures and opportuni-
catalytic impacts. According to Price Waterhouse ties brought by political institutions and the degree
and Coopers (PWC, 2016), aviation’s global econom- to which government policies impact on airline per-
ic impact (direct, indirect, induced and catalytic) is formances. In the extant literature, some research
estimated at US$3.560 billion, equivalent to 7.5% of endeavours (see works by Barrett, 2006; Doganis,
world Gross Domestic Product (GDP). 2013; Shepherd, 2012) argue that political factors
Mhlanga 3

significantly impact airline performances and ranked Similarly, Maqutu (2015) claims that the deprecia-
highest amongst the macro environmental factors tion of the South African Rand significantly affected
impacting airline performances. To illustrate this, ticket sales because the sales volume and cost struc-
Mwanza (2015) avers that governments in southern ture of airlines is dependent on foreign exchange fluc-
Africa often protect state carriers by monopolising cer- tuations which implies that unfavourable fluctuations
tain routes and allocating peak-hour landing slots significantly affect airline performance. Bhoola (2016)
to state carriers at the expense of private carriers. on the depreciation of the Rand reports that in January
In their study, Ensor and Baumann (2011) affirm 2016, US$1 was equivalent to R17.99). According to
this when they found a positive relationship between OBG (2017), this made travelling to South Africa
peak-hour slots and profitable business class opportu- quite affordable; a one-way trip between most city
nities, whilst off peak-hour slots were associated with pairs in 2016 typically cost US$80, making South
unprofitable economy class travellers. Such privileges Africa an exceptionally cheap tourist destination.
to state carriers have skewed commercial operations The increase in fuel levies and airport taxes in
and negatively affected private airlines (Steyn and Namibia have had a negative impact on airlines by
Mhlanga, 2016). increasing the cost of air transport in Namibia, in
According to Mananavire (2016), governments in which case road transport is preferred (OBG, 2017).
southern Africa retain veto power over their airline’s Zhou (2012) found that the hyperinflationary macro-
commercial decisions, including route networks and economic environment in Zimbabwe, characterised by
payroll cuts. Mwanza (2015) argues that due to gov- a shortage of foreign currency, increased the opera-
ernment interference many carriers in southern Africa, tional difficulties of Air Zimbabwe. Consequently,
such as Air Zimbabwe, Air Botswana, Air Namibia the lethal cocktail of economic recession, high oil
and South African Airways (SAA), are characterised prices, currency instability and a drop in demand for
by substantial losses, overstaffing, lack of a clear devel- air travel, has significantly affected airline performan-
opment strategy and bureaucratic management. For ces in southern Africa (OBG, 2017).
example, due to political interference SAA had to
introduce non-viable routes that play a strategic role Socio-cultural factors
in growing economic relationships and dependencies
Socio-cultural factors relate to the cultural aspects,
between the BRIC countries of Brazil, Russia, India,
attitudes and beliefs that affect the demand for airlines
China and South Africa. This was a direct result of a
and airline performances. There is a significant
politically motivated process favouring stronger rela-
difference between socio-cultural factors and airline
tions with BRIC countries at the expense of traditional
performances (Hermann, 2012). To illustrate this,
European connections, but without due consideration
Hermann (2012) claims that the growing income of
to the financial implications thereof (Steyn and
the black middle class in South Africa has increased
Mhlanga, 2016).
the demand for air travel. Based on the Living
Standard Measure (LSM), the black middle class
Economic factors increased by 48% between 2001 and 2013 (Botha,
Economic factors relate to economic policies, economic 2014). Consequently, the rise in the black middle class
structures and the degree to which the economy factors led to an increase in the national disposable income.
impact on airline performances. Cederholm (2014) Furthermore, Bennett (2005) claims that the lan-
found that economic factors significantly impact on air- guage used by SAA for in-flight announcements had a
line performances and ranked highest amongst the significant effect on the performance of the airline.
macro environmental factors that impact airline per- The same author argues that SAA dropped in-flight
formances. To illustrate this, Bhoola (2016) claims announcements in Afrikaans (contrary to Comair) in
that for every 10% increase in South Africa’s GDP, 1996 and this had an effect on product loyalty. During
the volume of air passengers rose by 8.4% and that of the apartheid era, SAA used both Afrikaans and
air cargo by 14.8% in 2015. Bhoola (2016) further English for in-flight announcements (Bennett, 2005).
argues that due to the depreciation of the Rand airfares However, post-apartheid, SAA started using English
in South Africa have increased by roughly 20 to 40% in only and many Afrikaans-speaking customers changed
a three-year period (from 2014 to 2016). According to allegiance to other airlines, and this had a significant
the Oxford Business Group (OBG, 2017), this dispro- effect on SAA’s profitability because Afrikaans
portionate increase in pricing without a relative growth customers constituted a huge market to SAA
in the wealth of the country means that the consumer (Ssamula, 2012).
base for airline passengers has not increased, yet the Demographic factors also play a role in airline per-
cost of flying has increased. formances. Currently, retiring baby boomers’
4 Tourism and Hospitality Research 0(0)

(those born between 1965 and 1964) spending habits airspace (its most lucrative route) over safety concerns
on travel is decreasing (Botha, 2014). According to due to its aged aircraft (eNCA, 2017).
OBG (2017), the future of travel is now driven by
the growth in the millennial generation (those born Environmental factors
between 1980 and 1999). Millennial generation are
Environmental factors relate to the ecological and
now active customers and their spending is growing
environmental aspects that affect the demand for air-
and is expected to continue to grow and thereby lines and airline performances (Hart et al., 2010).
impacting on airline performances (Botha, 2014). In terms of CO2 and Green House Gas (GHG) emis-
sions within global tourism, air transport contributes
Technological factors 40% of the overall CO2 emissions within tourism and
Technological factors relate to the technological 54–75% of radiative forcing, and these figures are likely
aspects, innovations, barriers and incentives, and the to increase further (Anderson and Bows, 2008). This
degree to which they impact on airline performances. led Higham and Cohen (2011) to suggest that tourism
According to Porter and Kramer (2011), in aviation, is becoming a major contributor to climate change, and
technology means speed and also convenience and tourism trends show that there are an increasing
safety. Whether it is air traffic or passenger safety, number of people travelling by aircraft, an increasing
the role of technology is critical (Truxal, 2013). number of trips made per year and increases in the
Shankman (2014) found that technological factors average travel distances per flight. Governments have
significantly affected the performance of airlines due been trying to reduce the environmental effect of avia-
to improved communication facilities, which reduced tion by introducing carbon taxes on ticket prices or
the need to fly for meetings, leading to fewer people aviation fuel (Anderson and Bows, 2008). However,
flying to business destinations because technology, all that carbon taxes do is to significantly increase trans-
in the form of teleconferencing, web conferencing port costs and thereby significantly affect airline per-
and video-conferencing, has reduced the travelling formances (Higham and Cohen, 2011).
patterns of business people. Technology makes it pos-
sible for meetings to be designed so that participants Legal factors
actually experience their colleagues as being on the Legal factors relate to the laws, regulation and legisla-
other side of the same table they are sitting at, despite tion that affect airline performances. There is a signif-
the fact that they are on the other side of the world icant difference between legal factors and airline
(Shankman, 2014). performances (Mulder, 2015). To illustrate this,
Networked technologies have made it possible for SAA was ordered to pay more than US$7.68 million
airlines to reach a large number of consumers instantly in damages to Nationwide by the South Gauteng High
(Shankman, 2014). Consumers can book flight tickets Court in South Africa following the ruling of the
online with the click of a button (Truxal, 2013). Competition Tribunal in 2016 that SAA abused its
The ability to reach a large number of customers pro- dominance in the local market and played a major
vides airlines with competitive advantages (Porter and role in the demise of Nationwide (Slabbert, 2016).
Kramer, 2011). Furthermore, technology has helped In February 2017, the South Gauteng High Court
airlines to become more fuel efficient thereby reducing awarded a US$856 million settlement to Comair in
travelling costs (Mulder, 2015). However, technology its case against SAA in respect of its travel agent incen-
has increased competition in the airline industry, tive schemes, which was found to be anti-competitive
because it is available to every airline in the industry. (eNCA, 2017). Similarly, Air Namibia also lost several
According to Mulder (2015), if only a single airline lawsuits from aircraft service providers (Kahiurika,
had access to technology, it would have a remarkable 2016). Air Zimbabwe is separately embroiled in a
advantage. In an industry that is saturated with tech- legal battle with about 400 sacked workers who are
nology, the outcome is a marketing race in which every demanding US$1.3 million in severance pay awarded
airline is struggling for a competitive advantage over to them by an independent arbitrator (Bhebhe, 2016).
its rivals (Porter and Kramer, 2011). The performance of airlines in southern Africa is
However, lack of new technology is affecting Air also affected by restrictive bilateral air service agree-
Zimbabwe’s financial performance. According to ments. Southern African countries continue to artifi-
Ndlovu (2016), Air Zimbabwe’s equipment is so old cially restrict international air travel by limiting the
and unattractive that customers doubt the safety of the number of flights to their cities as well as the number
aircraft. As a result, in May 2017, the European of airlines that may fly to them (Surovitskikh and
Commission (EC) banned Air Zimbabwe from its Lubbe, 2015). According to Abate (2013), because of
Mhlanga 5

these restrictive bilateral arrangements, most southern on airlines based on experience, knowledge and judg-
African airlines are not able to operate as many routes ment of the researcher, and hence, it had an element
or frequencies as they want to, resulting in high air fares of bias resulting from subjective data. Consequently,
and low passenger numbers. a self-administered questionnaire adopted from
Surovitskikh and Lubbe (2015) was customised to
address the objectives and setting of the study after
Research questions
permission was obtained from the mentioned authors.
The primary objective of this study was to determine Airline managers were requested to rate the impacts
the impacts of the macro environment on airline per- of macro environmental factors on airline performan-
formances. In order to achieve the primary objective ces. PESTEL factors were used as exogenous variables
the following research questions were formulated: since the extensive literature review identified
these macro factors as the most obvious that impact
• How do macro environmental factors impact on on airline performances (Barros and Wanke, 2015;
respective airline performances in southern Africa? Doganis, 2013; Heinz and O’Connell, 2013), whilst
• Which macro environmental factors significantly airline performances was treated as an independent
impact on airline performances in southern Africa? variable. This method of testing the relationship
between macro environmental factors and airline per-
Research methodology formances is comparable to the technique used by
Tesfay and Solibakke (2015). These researchers used
Southern Africa harbours 18 airlines registered by the macro environmental factors as exogenous variables,
Airline Association of Southern Africa (AASA) whilst airline performances was treated as an indepen-
of which 8 were used for the study. These airlines dent variable.
complied with the criteria set by AASA (2017: 4) The independent variable (airline performances)
for classification as a commercial airline, namely, was tested by requesting key airline personnel to rate
‘an airline dedicated to the transport of passengers’. the impacts of various macro factors on airline per-
The other airlines could not be classified as passenger formances. A total of 24 macro factor attributes were
airlines but as cargo airlines and were there- included in the measurement instrument. As in the
fore excluded. study by Tesfay and Solibakke (2015), a five-point
A quantitative method research design was fol- Likert scale was used. Since each point in the Likert
lowed. Structured questionnaires were distributed to scale had a descriptor, a fully anchored rating scale
senior airline managers to collect data that was used (Johnson and Christensen, 2004) was applied. The
for correlation coefficient and regression analysis to five response alternatives for measuring the impacts
investigate the relationship of overall airline perform- of the macro environment on airline performances
ances (dependent variable) with macro environmental ranged from ‘very negative – (1) ’, ‘negatively – (2) ’,
factors (independent variables). In quantitative ‘neither negative nor positive – (3) ’, ‘positively – (4)’
research, an investigator relies on numerical data to to ‘very positive – (5)’.
test the relationships between the variables (Leedy The clarity of the instructions, ease of completing
and Ormrod, 2013). Ethical clearance was obtained the questionnaire (there were 24 items in the question-
from the Ethics Committee of the Faculty of Business naire) and time taken to complete the questionnaire
and Management Sciences of Cape Peninsula (Leedy and Ormrod, 2013) were piloted using eight
University of Technology. airline managers in each of the targeted airlines. No
Although two standard surveys, namely the Data changes were made to the questionnaire. The study
Envelopment Analysis (DEA) (proposed by Charnes was voluntary and verbal consent was obtained from
et al., 1978 based on the earlier work of Farrell, 1957) all the airline managers, whilst permission was
and the Analytical Hierarchy Process (AHP) (devel- obtained from the airline Chief Executive Officers
oped by Saaty in 1980), have been applied in previous (CEOs). It was, however, agreed that the identity of
quantitative studies on airline research, they were all airlines be revealed but the names of respondents
deemed unsuitable for this study. The Data be kept anonymous. The population of the study was
Envelopment Analysis (DEA) was not able to address regarded as a key airline manager. Purposive sampling
the objectives of this study since it is a non-parametric was therefore used (Leedy and Ormrod, 2013).
method that is used to estimate the production fron- Purposeful sampling is a non-probability sampling
tier of Decision Making Units (DMUs) with multiple method whereby the researcher chooses the sample
inputs and multiple outputs. Although the Analytical based on who they think would be appropriate for
Hierarchy Process (AHP) questionnaire could address the study. It is used primarily when there is a limited
the objectives of the study, it required subjective data number of people that have expertise in the area being
6 Tourism and Hospitality Research 0(0)

researched. The sample size for the study was deter- The fact that ‘route monopoly’ and ‘(good) landing
mined such that it achieved a 95% confidence level slots’ had the highest positive impact on the perfor-
and was within a 5% sampling error (Leedy and mance of state carriers is indicative of the preferential
Ormrod, 2013). Consequently, a sample size of at treatment and privileges state carriers have in southern
least 150 managers was deemed appropriate and Africa. For instance, SAA controlled airports for a
therefore used for this study. long time and benefited from good (peak) landing
A scanning question, on whether the respondent slots and allocated off-peak landing slots to private
was a key airline manager was used to identify the airlines which made it very difficult for new airlines
target sample. In order to ensure content and face entering the market. Peak-hour landing slots allocated
validity (Leedy and Ormrod, 2013), a literature to SAA at the expense of private carriers were also a
study was undertaken and the survey instrument was critical factor leading to the demise of 1Time
scrutinised by relevant academics at CPUT and avia- (Mhlanga et al., 2018), simply because it could not
tion experts before the instrument was finalised. As compete for the business class market.
the research involved executives who were difficult to Similarly, Table 1 shows that ‘(bad) landing slots’
access, respondents were first contacted by email for had the highest negative impact on Comair (1.25),
consent and to schedule an appointment for data col- whilst ‘political interference’ had the highest negative
lection. Therefore, questionnaires were only distribut- impact on SAA (1.14), SAX (1.23), Air Namibia
ed to those who agreed to participate in the study. (1.22) and Air Botswana (1.38). A possible reason
The researcher explained the purpose of the survey, for the highest negative impact of ‘political interfer-
indicated that participation was voluntary, and ence’ on state airlines might be that governments in
southern Africa retain veto power over their airline’s
requested the manager to complete the questionnaire
commercial decisions, including route networks, fleet
voluntarily. Completed questionnaires were collected
acquisition and, most significantly, payroll cuts
by the researcher, but the distribution of question-
(Mananavire, 2016).
naires continued until the number of fully completed
The responses from Comair that indicate that ‘bad
questionnaires corresponded with the targeted sample
landing slots’ had the highest negative impact on their
size. Airlines were visited for data collection in June
airline, correlate with the findings by Ensor and
and July 2016. Exploratory factor analysis was used to Baumann (2011) who found a positive relationship
identify the underlying dimensions of macro environ- between peak-hour slots and profitable business class
mental factors impacting on airline performances. opportunities, whilst off peak-hour slots were associ-
The data were captured and analysed by the research- ated with unprofitable economy class travellers. It is
er by means of the Statistical Package for Social no surprise that ‘bad landing slots’ had the highest
Sciences (SPSS) software version 22. negative impact on Comair since as a strategy to arti-
ficially restrict competition from private carriers the
Findings South African government ensures that ACSA allo-
cates off-peak landing slots to private airlines
Accordingly, Table 1 shows the results and the variable (Mwanza, 2015).
mean scores and standard deviations for macro envi- From the preceding points, it is clear that national
ronmental factors impacting airline performances in airlines had preferential treatment at the expense of
southern Africa. private operators. However, such preferential treat-
Table 1 depicts the mean scores and standard ments often deceive state carriers into a false sense
deviations calculated for the impacts of the macro of robustness of their sources of competitive advantage
environment on the performance of airlines. An initial and thereby become less attentive to changes in the
glance at the data reveals that the impacts of the macro macro environment (Bhebhe, 2016). Such preferential
environmental factors on the performance of airlines treatments in state carriers also put off the need for
differed between different airlines. For instance, reforms and allow inefficiency to thrive.
the use of ‘efficient aircraft’ (V16) had the highest In order to determine whether the macro environ-
positive impact on the performance of Comair ment significantly impacted on airline performances,
(4.76), whilst ‘route monopoly’ (V5) had the highest the 24 macro environmental factors were factor-
positive impact on the performances of Airlink (4.79) analysed, using principal component analysis with
and all state airlines, namely, Air Zimbabwe (4.59), orthogonal VARIMAX rotation, to identify underlying
SAX (4.58), Air Namibia (4.67) and Air Botswana factors. The extraction of the factors and the variables
(4.59). Furthermore, ‘(good) landing slots’ (V4) had were based on the Eigenvalues and the factor loadings
the highest positive impact on the performance of of the variables. Only factors with an Eigenvalue larger
SAA (4.87). than one and attributes with loading > 0.50 were
 Mhlanga

Table 1. Means (M) and standard deviations (SD) for the macro environmental factors impacting on respective airlines.

Airlines

Comair Mango Airlink SAX Air Zimbabwe Air Namibia Air Botswana SAA

Macro factors M SD M SD M SD M SD M SD M SD M SD M SD

V1 Political interference 3.82 0.67 3.46 0.79 3.72 0.89 1.23 0.73 1.27 0.92 1.22 0.79 1.38 0.93 1.14 0.83
V2 Regulation 1.73 0.81 3.14 0.95 2.58 0.43 2.89 0.91 4.02 1.07 2.80 1.03 3.35 1.03 4.08 0.76
V3 Deregulation 3.67 1.06 2.67 1.26 2.46 0.70 2.65 0.69 2.31 0.83 3.01 0.56 2.76 0.82 2.31 0.94
V4 Landing slots 1.25 0.47 4.49 0.67 3.38 0.57 4.16 0.45 4.26 0.76 4.05 0.46 4.37 0.65 4.87 0.53
V5 Route monopoly 2.86 0.68 4.01 0.54 4.79 0.58 4.58 0.75 4.59 0.81 4.67 0.61 4.59 0.97 4.83 0.92
V6 Rising fuel costs 1.56 0.71 1.44 1.14 1.37 1.03 1.37 0.99 1.37 1.29 1.29 0.68 1.42 0.62 1.36 0.62
V7 Depreciating Rand 1.39 0.63 1.19 0.73 1.21 0.58 1.42 1.27 1.93 0.64 1.43 0.71 3.20 0.81 1.21 0.51
V8 High operation costs 1.63 0.51 1.66 0.88 1.69 0.66 1.84 0.60 1.72 0.52 1.57 0.58 2.41 0.53 1.58 0.87
V9 High disposable income 4.02 0.89 4.37 0.65 4.28 1.25 4.09 0.87 3.11 0.92 4.07 0.92 4.28 0.79 4.09 1.27
V10 Recession 2.78 0.96 1.73 0.68 2.32 0.64 2.87 0.61 1.07 1.31 2.43 1.21 3.39 0.88 2.73 0.58
V11 Demographic changes 4.27 0.72 3.62 0.51 4.18 0.43 3.89 0.45 3.51 0.70 3.86 0.82 3.87 1.13 2.97 0.49
V12 Lifestyle changes 4.14 0.58 4.01 0.59 3.90 0.51 4.03 0.68 3.64 0.57 3.24 0.69 4.09 0.61 2.86 0.62
V13 Income distribution 4.20 0.69 4.13 1.07 3.81 0.63 4.28 0.52 3.92 0.66 3.90 0.71 3.76 0.52 4.07 0.91
V14 Social mobility 4.32 0.89 4.26 0.63 4.03 0.76 4.23 1.27 4.43 0.41 4.07 0.92 3.95 0.85 4.01 0.65
V15 Online ticket booking 4.71 1.03 4.86 1.31 4.31 0.83 4.30 0.61 4.17 0.92 4.08 1.23 4.39 0.45 4.58 0.76
V16 Efficient aircrafts 4.76 0.67 4.23 0.77 3.44 0.81 2.94 0.94 2.79 0.97 3.36 0.87 2.17 0.91 3.26 0.42
V17 Video-conferencing 2.94 0.86 3.62 0.58 2.36 0.74 2.71 0.65 2.21 1.21 2.91 0.53 2.52 0.56 2.49 0.68
V18 Surface transport 3.25 0.52 3.08 0.71 2.94 0.96 3.38 0.42 3.66 0.61 2.88 0.62 2.96 1.33 3.14 0.89
V19 Safety features 4.15 0.83 4.07 0.51 2.89 0.54 1.32 0.92 1.70 0.87 3.47 0.91 2.51 0.84 3.66 1.32
V20 Ecological consequences 3.15 0.43 3.83 0.63 3.67 0.46 3.37 0.81 3.59 0.89 3.31 0.61 3.91 0.79 3.40 0.71
V21 Emissions 3.89 0.71 3.28 0.48 3.86 0.65 3.53 0.47 3.31 0.75 3.83 0.49 3.55 0.53 3.62 0.55
V22 Regulatory bodies 3.84 0.87 3.92 0.91 3.58 0.52 2.17 0.68 3.27 0.91 3.39 0.69 3.82 0.56 2.09 0.93
V23 International agreements 4.06 1.24 3.43 0.76 4.08 0.81 3.93 1.21 4.23 0.84 4.13 0.91 4.17 0.83 4.14 0.86
V24 Taxation 2.42 0.81 3.38 0.52 3.58 1.11 3.44 0.51 2.83 0.59 3.03 0.46 2.91 0.48 2.54 0.71
Overall 3.28 0.76 3.43 0.76 3.28 0.72 3.14 0.75 3.07 0.85 3.18 0.77 3.34 0.76 3.18 0.76
p < 0.05; 1 ¼ very negative; 2 ¼ negatively; 3 ¼ neither negative nor positive; 4 ¼ positively; 5 ¼ very positive.
7
8 Tourism and Hospitality Research 0(0)

Table 2. Factor and reliability analysis results of the macro environmental factors impacting on airline performances.

Factors

Items F1 F2 F3 F4 F5 F6 Communalities

V1 0.843 0.725
V2 0.749 0.691
V3 0.785 0.706
V4 0.790 0.680
V5 0.861 0.782
V6 0.796 0.693
V7 0.805 0.665
V8 0.714 0.711
V9 0.738 0.565
V10 0.664 0.602
V11 0.852 0.734
V12 0.750 0.671
V13 0.776 0.722
V14 0.744 0.644
V15 0.635 0.706
V16 0.671 0.611
V17 0.706 0.525
V18 0.811 0.670
V19 0.627 0.703
V20 0.838 0.514
V21 0.769 0.674
V22 0.683 0.620
V23 0.725 0.653
V24 0.661 0.724
Eigenvalue 5.747 5.256 4.195 3.970 3.625 1.861 24.654
% of variance 28.823 25.420 11.302 8.953 6.504 4.305 85.307
Cronbach’s alpha 0.8294 0.7637 0.8006 0.8626 0.7355 – 0.8976
Number of items 5 5 4 5 3 2

considered. The exploratory factor analysis extracted environmental factors identified by VARIMAX as reli-
five factors, which accounted for 85% of variance in able and consistent with an Eigenvalue greater than
the data. Since the sixth factor contained only two one are as follows:
items, it could not be considered as a factor and is Factor 1: Political factors had five attributes which
not interpreted. Table 2 illustrates the results of this accounted for 28.82% of the variance, with an
VARIMAX process. Eigenvalue of 5.75 and an alpha coefficient of 0.83.
Reliability analysis (Cronbach’s alpha) was calcu- This factor included the following attributes ‘Political
lated to test the reliability and internal consistency of interference’, ‘Regulation’, ‘Deregulation’, ‘Landing
each factor. The results of the reliability analysis slots’ and ‘Route monopoly’.
showed that Cronbach’s alpha coefficients of the Factor 2: Economic factors had five attributes
extracted factors ranged from 0.74 to 0.86. That is which accounted for 25.42% of the variance, with an
well above the minimum value of 0.60, which is con- Eigenvalue of 5.26 and an alpha coefficient of 0.76.
sidered acceptable as an indication of scale reliability This factor included the following attributes ‘Rising
(Leedy and Ormrod, 2013). These values suggest fuel costs’, ‘Depreciating Rand’, ‘High operation
good internal consistency of the factors. Finally, costs’, ‘High disposable income’ and ‘Recession’.
Cronbach’s alpha value for the overall airline perfor- Factor 3: Socio-cultural factors had four attributes
mance scale is 0.89 and indicates its high reliability. which accounted for 11.30% of the variance, with
Most of the factor loadings were greater than 0.60, an Eigenvalue of 4.19 and an alpha coefficient of
implying a reasonably high correlation between 0.80. This factor included the following attributes
extracted factors and their individual items. The ‘Demographic changes’, ‘Lifestyle changes’, ‘Income
communalities of 24 items ranged from 0.51 to 0.78 distribution’ and ‘Social mobility’.
indicating that a large amount of variance has been Factor 4: Technological factors had five attributes
extracted by the factor solution. The five macro which accounted for 8.95% of the variance, with an
Mhlanga 9

Table 3. Correlation results of macro environmental field, thereby preventing privately owned airlines
factors and overall airline performances. from competing effectively. Therefore, political inter-
Overall airline performances ference has resulted in an un-level playing field in the
Macro airline industry and served to destabilise rival opera-
environmental Correlation Significance tors and, in most cases, is considered to have been a
factors coefficient (r) (p value) contributing factor to the demise of several private
Political 0.73 <.0001*
airlines such as 1Time (Mhlanga et al., 2018).
Economic 0.70 <.0001* A possible reason for significant negative correlation
Socio-cultural 0.55 <.0001* between economic factors and airline performances
Technological 0.41 <.0001* might be due to the depreciation of the South African
Legal 0.58 <.0001* which led to an increase in airfares in South Africa by
roughly 20 to 40% in a three-year period (from 2014 to
Note *: indicates a significant difference (p<0.05)
2016) (Bhoola, 2016). The 20 to 40% increase was
well above the Consumer Price Index (CPI) as well as
Eigenvalue of 3.97 and an alpha coefficient of 0.86. This the GDP growth of the economy over the same period.
factor included the following attributes ‘Online ticket This disproportionate increase in pricing without a rel-
booking’, ‘Efficient aircrafts’, ‘Video-conferencing’, ative growth in the wealth of the country means that the
‘Surface transport’ and ‘Safety features’. consumer base for airline passengers has not increased,
Factor 5: Legal factors had three attributes which yet the cost of flying has (OBG, 2017).
accounted for 6.50% of the variance, with an The significant impact of economic factors on the
Eigenvalue of 3.63 and an alpha coefficient of 0.74. performances of Air Zimbabwe might be attributed to
This factor included the following attributes the hyperinflationary macroeconomic environment in
‘Regulatory bodies’, ‘International agreements’ Zimbabwe, characterised by a shortage of foreign cur-
and ‘Taxation’. rency, has increased the operational difficulties of
The five orthogonal factors (Political, Economic, Air Zimbabwe (Zhou, 2012). Consequently, the
Socio-cultural, Technological and Legal) were used lethal cocktail of economic recession, high oil prices,
in Pearson’s product-moment correlation coefficient currency instability, and a drop in demand for air
and regression analysis to investigate the relationship transport have significantly impacted negatively on air-
of overall airline performances (dependent variable) line performances in southern Africa (OBG, 2017).
with the five macro environmental factors (indepen- A possible reason for the significant negative correla-
dent variables). The results of the correlation analysis tion between technological factors and airline perform-
are depicted in Table 3. ances might be attributed to the fact that technology, in
The data revealed that four macro environmental the form of teleconferencing, web conferencing and
factors had a significant negative correlation video-conferencing has reduced the travelling patterns
(p < 0.05) with airline performances, whilst socio- of business people (Shankman, 2014). A possible
cultural factors had a significant positive correlation reason for the significant negative correlation between
(p < 0.05) with airline performances. The highest neg- legal factors and airline performances might be that state
ative correlation with overall airline performances were carriers are constantly bombarded with lawsuits from
political factors (r= 0.73), followed by economic fac- displeased clients, staff and competitors. For instance,
tors (r=0.70) and legal factors (r=0.58). Air Namibia has also lost several lawsuits from aircraft
Previous research scholars (Barrett, 2006; Doganis, service providers (Kahiurika, 2016). Air Zimbabwe is
2013; Shepherd, 2012) confirmed the significant separately embroiled in a legal battle with about 400
impact of political factors on airline performances. sacked workers who are demanding US$1.3m in sever-
A possible reason for the significant negative correla- ance pay (Bhebhe, 2016). Similarly, in 2016, SAA was
tion between political factors and airline performances ordered to pay more than US$7.68 million in damages
might be that governments in southern Africa retain to Nationwide by the South Gauteng High Court
veto power over their airline’s commercial decisions (Slabbert, 2016).
(Mananavire, 2016). Southern African governments The other reason might be the restrictive bilateral air
often use their national airlines to generate employ- service agreements that inhibit competition. Southern
ment for populist gains and thereby over-manning African countries continue to artificially restrict inter-
the airlines, and this has negatively impacted on the national air travel by limiting the number of flights to
financial performance of state airlines (Steyn and their cities as well as the number of airlines that may fly
Mhlanga, 2016). to them (Surovitskikh and Lubbe, 2015). According to
Furthermore, government bailouts to state carriers Abate (2013), because of these restrictive bilateral air
serve only to distort any prospect of a level playing service arrangements, most southern African airlines
10 Tourism and Hospitality Research 0(0)

Table 4. Regression results of macro environmental fac- airline performances was confirmed by the findings
tors and overall airline performances. of this study.
Model: Overall airline The model F value was calculated at 24.65
performances (p < 0001). The five macro environmental factors
Independent had a coefficient determination (R2) of 0.85
variables t value p value (Table 2) and thus explained more than 85% of the
Political 10.35 0.0097* variability in overall airline performances. This expla-
Economic 12.08 0.0001* nation of the variability in overall airline performances
Socio-cultural 4.21 0.6798 is high when compared to other studies. For example,
Technological 6.04 0.0317* the regression results of a study performed by
Legal 9.19 0.0143* Cederholm (2014), identified economic, socio-
cultural and technological factors as significant factors
*Significant relation (p < 0.05).
(p < 0.05) impacting on airline performances, which
explained only 61% of airlines’ performances.
are not able to operate as many routes or frequencies as
Therefore, it is apparent that political and
they want to and have resulted in high air fares and low economic factors significantly impacted negatively
passenger numbers in southern Africa. on the performances of airlines whilst socio-cultural
A possible reason for the significant positive corre- factors significantly impacted positively on airline per-
lation between socio-cultural factors and airline per- formances. According to Mwanza (2015), political
formances might be attributed to the growing black interference in the disguise of protecting state carriers
middle class in South Africa which has increased tend to create conditions that foster inefficiencies,
demand for air travel (Hermann, 2012). Based on mediocrity and incompetence inherent in state car-
the ‘Living Standard Measure’ (LSM), the black riers. It is no surprise that SAA has seen its dominant
middle class has increased by 48% between 2001 control of the South African market eroded by nim-
and 2013 (Botha, 2014). Consequently, the rise in bler, privately held start-ups, like FlySafair, whose
black middle class has led to an increase in disposable acquisition and deployment of aircraft is dictated by
income and positively impacted on consumers’ travel- sound commercial analysis rather than political vanity.
ing patterns. Consequently, the unwillingness to deviate from the
A full regression model was run for the dependent dogma has precipitated the failure of many state car-
variable (airline performances). The model regressed riers in southern Africa (OBG, 2017).
the five macro environmental factors against overall
airline performances. The regression model is Implications and concluding statements
depicted in Table 4.
The regression model depicted in Table 4 shows that The purpose of this research endeavour was to deter-
four macro environmental factors, namely, political mine the impacts of the macro environment on airline
(p < 0.0097), economic (p ¼ 0.0001), technological performances in southern Africa. The findings show
(p ¼ 0.0317), and legal factors (p < 0.0143) significant- that macro environmental factors impacted differently
on the performance of respective airlines. For
ly impacted (p < 0.05) negatively on airlines’ perform-
instance, the use of ‘efficient aircraft’ highly impacted
ances. The t values in Table 4 indicate the magnitude of
positively on the performance of Comair whilst ‘route
each factor in impacting on airline performances.
monopoly’ had the highest positive impact on the per-
Economic factors (t=12.08) were rated by respond-
formance of Airlink. Furthermore, ‘(good) landing
ents as the macro environmental factor highly impact-
slots’ highly impacted positively on the performance
ing negatively on airline performances, followed by of SAA whilst ‘(bad) landing slots’ had the highest
political factors (t=10.35), legal factors (t=9.19) negative impact on Comair. ‘Political interference’
and technological factors (t=6.04). highly impacted negatively on state airlines.
A study performed by Cederholm (2014) also Overall, the findings show that political, economic,
found that economic factors ranked highest amongst technological and legal factors have a significant neg-
the factors that had an impact on airlines’ perform- ative correlation (p < 0.05) with airline performances
ances, but some research endeavours (Barrett, 2006; whilst socio-cultural factors have a significant positive
Doganis, 2013; Shepherd, 2012) found political correlation (p < 0.05) with airline performances. From
factors as the factor highly impacting airline perform- the study, it is clear that the increased cost of operating
ances. The idea, brought up for discussion by airlines, government interference and overprotection
airline managers, that socio-cultural and technological of state carriers, increased competition (due to tech-
factors could play an important role in influencing nology) and restrictive bilateral air service agreements
Mhlanga 11

have negatively affected airline performances in south- Declaration of conflicting interests

ern Africa. However, changes in passenger profile and The author(s) declared no potential conflicts of interest with
a rise in the black middle class have positively affected respect to the research, authorship, and/or publication of
airline performances. this article.
To improve airline performances, southern African
governments must create a level playing field for private
and state carriers. Governments must stop protecting Funding
state carriers at the expense of private airlines. The fact
that the state is competing with privately owned airlines The author(s) received no financial support for the research,
in a deregulated market presents the conundrum of the authorship, and/or publication of this article.
state wearing two hats, acting as both a ‘referee and a
player in the market’. Therefore, partial and selective References
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