Sustainable competitive advantage arising from competitive startegies adopted by low-cost airlines in Kenya: case of Five Forty Aviation Ltd
This case study was carried out with the objectives of establishing the sustainable competitive advantage arising from competitive strategies Five Forty Aviation has adopted as a low-cost carrier to compete successfully in the face of competition in the turbulent airline industry and determine the challenges in the application of these chosen competitive strategies. The study findings indicate that Five Forty Aviation has managed to proactively execute various strategies that have enabled it to compete effectively in the turbulent aviation industry which has been dogged with rising costs, competition and a slow down in airline traffic due to the deteriorating economic climate. During the global financial crisis early this year saw most major airlines opting to downsize and aggressively cut costs to survive the massive losses they felt. Five Forty Aviation was not only spared by this downturn but boosted. This is because of its lean business model which offered a compelling alternative at a time when people were conserving money to cover essentials such as food, shelter and family necessities. In its strategy to be a low cost provider, Five Forty Aviation has undertaken to cut costs by flying to secondary airports and by operating a fleet of modem turbo props which offer an ideal mix of comfort, speed and economic operating costs. Other strategies used by the airline to stay competitive include use of low fares to attract customers, frequent flying from point to- point, low operating costs on aircraft equipment and a lean and mean workforce, use of online booking over the internet, commitment to safety and quality maintenance, diversifying its business, using the first mover advantage and being able to differentiate its products from those of its competitors. At the core of a low-cost model are these cost-reductions, which partly end up in cheaper tickets for passengers. The study also found out that Five Forty Aviation's management undertakes the responsibility of strategy formulation, implementation and evaluation. The management reviews its strategies from time to time and it's a continuous process to stay competitive. This is supported by Ohmae (1985) who contends that if an organization is to manage its environment, it will seek to be proactive rather than reactive. From the findings, it is clear that Five Forty also embraces modem technological innovations. On-line processes such as E-Crewand Omni-Flow have been adapted to help streamline flow of information. Organizational learning approach is also used by the organization to ensure that information is shared within the organization and in particular between groups, functions, and geographical locations. A climate of openness has been encouraged to facilitate creation of new knowledge The organization has also diversified its business to increase its revenues and market penetration by operating chartered flights in Libya and freight services. Despite all these cutting edge strategies, the airline has been greatly facing various challenges in the implementation of these strategies. They include high cost of fuel, internal competition, shortage of trained and skilled manpower, increasing labor costs, infrastructural hurdles and deficiency of airports and airstrips which have greatly affected the airline's growth strategy. To survive the situation resulting from these challenges, the firm has opted to minimize its operating costs, hedge the fuel pricing and improve its load factor. This has enabled the organization to tap potential markets by enlarging the size of air traveling segment by aggressive marketing, improving the ancillary revenues by in-flight marketing, and selling packages with tours and hotels along with tickets for sustainability. Managers are convinced that the low-cost carrier industry in Kenya has not yet realized its full potential and that this industry is one that expects growth and sustainability in the years to come.