Airline Industry Breakup of Velvet

Critically review Velvet Sky’s entry onto the market. In analysing its performance, be sure to review the South African market for air travel. Give some indication as to what you see as the future of the local industry. Explain why Velvet Sky in particular was a failure.  

Velvet   Sky made it’s inaugural flight on 22nd March 2011.   There was nothing too special about that time, there was the expected cooling off in passenger bookings rates on the conclusion of the 2010 world cup soccer.   The Reserve Bank was predicting a growth rate of about 3.5 % (quoted in exam text) for the following year and travel figures, which are so dependent on financial trends were predicted to rise.   In addition the internal fight routes were running to near capacity with all peak times being oversubscribed.
Velvet Sky Airways, a new entrant to the market was run by a CEO who was an ex-attorney.   To run successfully airline management need to understand the key drivers of the airline business which have certain peculiarities.  
An airlines customer base is fragmented and needs to catered for in very different ways.   Two exist, passengers, (primarily business travellers and tourist (be they casual or package booked) and then the moving of freight. The industry is then highly impacted by external sources, e.g. how the tourist industry is run and government interference (for both supposedly good reasons, e.g. the employment of people, to corruption and personal gratification).   Internal issues such as access to the Global Distribution System (a number of databases which hold flight and reservation detail), Airport Slot Allocation (considered to be a key asset in the airline industry, i.e. the right to park your aircraft a high turnaround location at an airport, places which are inherited or bought over time), safety records, cost of tickets and types of on board service will rate the quality of the airline.
Added to these ever present industry factors is competition. The early market...