Question

2.2 Under what market structure does the airline industry currently operate in South Africa?
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Answer 1

Answer:

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Answer 2

The regulation of South African aviation was founded on the principle of "air sovereignty" . On 1st February in the year 1934, South African Airways (SAA) was founded, a public airline operating domestic, local and international routes.

Explanation:

• As the "flag carrier", SAA was secured from "competition" for over 40 years. However, later, under the "Air Services Licensing Act, 1990, the domestic market was completely deregulated by eliminating business entry & exit controls, capacity, tariff, & frequencies. Around the time of airline deregulation, SAA had reported a domestic market share of more than 90% of all "scheduled passengers", wherein  75 percent of these passengers  traveled  on  the major  routes,  such  as   Cape  Town, Durban, &  Johannesburg  routes.
• After the deregulation, the South African domestic air transport market was characterized by the entry & exit, of several air transport service providers. Low-cost carriers have today been typical to the "South African" domestic air travel environment since 2001. The introduction of low-cost carriers has resulted in major changes in the domestic industry, mostly because of the development impacted by such carriers
• The legalization of the South African domestic aviation industry brought the sector 'turbulent time.' Only three of the new entrants have survived in a highly competitive market, namely A / Comair, kulula.com, and Mango. Deregulation has nevertheless brought significant advantages for the public as the airlines are now having to compete for the first time , offering airlines and fees to the public traveling, particularly between the "Golden Triangle cities.  
• It may also be claimed that a low-cost innovation in a very controlled industry would not have taken place because competition with SAA was not permitted before 1991. The law at the time imposed tough requirements on all applicants who wished to compete with SAA on the main routes since the legislation during that time had placed challenging conditions on any applicant who wished to compete against "SAA on the main routes".
• In the South African market too, the entry and development of low-cost airlines and their significant expansion on the routes they travel is an important phenomenon. Other  international  trends  are  low-cost airlines accomplishing  "higher  load  factors"  than  "full-cost  airlines";  the following response by the "full-service airlines" by increasing their "own load  factors";  and the "increasing" use  of secondary airports by the "low-cost carriers".

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