According to IATA (2011a) stated that ‘ the global airline industry’s jet-fuel costs are forecasted to a total of 166 billion in 2011, representing 29 percent of operating costs, with a normal cost of $96 per barrel of crude oil’. Truly, these assessments demonstrate the carrier business’ second most astounding plane fuel cost ever, just beaten by the record high 2008 level where the worldwide stream fuel charge added up to $189 billion or 33 percent of working costs, with a normal cost of $99per barrel of crude oil.
Aviation fuel represent the largest operating expenses for low-cost airlines such as Air Namibia. ‘The airline business is a difficult one, subject to frequent cost shocks, demand disruptions, and excess supply even in good times’. Air Namibia is currently experiencing the extreme external shocks hitting all airlines everywhere, high fuel costs, volatile exchange rates, and a weakening global economy and so on. It is no surprise that many airlines have been struggling in the past year. In fact, many of the world’s airlines, including some with long histories of profit and success have recently stumbled and are engaging in turnaround strategies of their own. Lufthansa, Air France, American and even Singapore Airlines are all in the process of restructuring. Fuel expenses make up the largest share of the Air Namibia budget. For financial year 2012/2013 fuel was budgeted to be NAD 788,558,000. This amount is more than the total cost of the next two larger cost items, maintenance and labour, combined.
Therefore Air Namibia has launched a fuel efficiency programme using an integrated approach which analyses every activity that has an impact on fuel consumptions including flight operations, flight dispatch and planning; maintenance and engineering; ground operations; and commercial. Fuel savings initiatives have now been defined and champions appointed (Air Namibia business plan, 2013:30).
‘Air Namibia will keep a strong focus on improving fuel efficiency furthermore, guarantee that enhanced procedures and approaches are clung to thoroughly’. A maintained increment in oil costs can endanger money related projections and may require possibility bolster by the Government. Certain measures can be taken to moderate a fuel value spike. These incorporate the present move to a more fuel-efficient fleet, completion of fuel conversation initiatives, fuel hedging, and raising fuel surcharges or fares.
Customer service and Quality
‘Client responsiveness is essentially about recognizing and fulfilling client needs. An organization can get prevalent client responsiveness by realizing what the clients need and by offering a more elevated amount of utility contrasted with rivals. Besides, client responsiveness is very identified with the other building pieces of competitive advantage, which implies that having a high level of productivity, quality and development could prompt unrivaled client responsiveness (Hill and Jones.2009).Air Namibia current on-time performance is poor, contributing to customer dissatisfaction and loss of market share. Reliable on-time performance is critical to improving customer satisfaction and essential to a network operation with competitive minimum connection times and higher aircraft utilisation.
‘Customer service, while on- board ‘hard’ product has improved with the introduction of new aircraft, the level of customer service offered by Air Namibia staff, both at airports and on board aircraft, has deteriorated’. This is a complex issues to resolve and require specific management attention and appropriate training and education. The airline business is exceptionally focused and the carrier’s piece of the overall industry on numerous courses is in decay. It will require investment and steady push to turn things around, yet it is fundamental this happens. This will bring about enhanced customer benefit and higher aircraft usage, in this way expanding income and decreasing unit operating expenses.
Internal and external analysis
The PESTLE analysis examine the macro-environmental factors and how they affect the airline industry.
‘ Air Namibia should analyse Porter’s five forces: the threat of new entrants, bargaining power of suppliers and buyers, threat of substitute products or services, and rivalry among existing competitors, we are aiming to identify the most significant factors inside these forces, therefore, improve comprehension of what impacts gainfulness in the business ( Porter, 2008:78-93).
Air Namibia should perform an internal analysis they are aiming to identify strengths and weaknesses within the airline at a company level. Furthermore, a company’s ability to develop and sustain a competitive advantage is not only a function of its environmental factors, but is largely dependent on the resources at its disposal and how they are utilized (Roos et al, 2007). Air Namibia should continue cultivating its internal strengths such as improving its sales and distributional channel, unit costs, load factors and employee productivity. In addition, the airline has room for improvements to its punctuality rate. Therefore, Air Namibia strongly advice to keep strengthening its brand as well as continue its ambitious innovative drive. By innovating faster than its competitors, the company might positively differentiate themselves from other airline in what is considered a highly transparent industry. Air Namibia can best reduce this risk by keeping its cost structure lean while improving its product and developing its commercial acumen. In order to survive the terrible economic conditions and a low demand for air travel, we advise Air Namibia management to take into account the following key strategic options, exploit high price sensitivity and improve liquidity. The airline should increase brand focus because it becomes a high priority for airline due to the imminent threat of foreign market entrants. By additionally strengthening its strong brand name, Air Namibia should be able to achieve a higher degree of customer loyalty in Namibia.