Competitors cry foul in SA’s battle of skies

CAPE TOWN – The birth of a new low-cost South African airline has been met enthusiastically by travellers but with resentment from competitors who claim it is being effectively bankrolled by the taxpayer.

Mango, whose parent company is a subsidiary of the national carrier South Africa Airlines (SAA), took the number of low-cost airlines to three this month when it began flying between Johannesburg, Durban, Cape Town and Bloemfontein. With ticket prices as low as 169 rand one way, some 80 000 tickets were snapped up in its first week in spite of problems accessing both the airline’s website and call centre.But if travellers are delighted by the battle of the skies, Mango’s competitors are less than happy that the latest entrant into the market has taken flight with a R100 million cash injection from the state-owned SAA.”It is always good to have more competition, but that competition must be fair,” said Glenn Orsmond, chief executive of rival carrier 1time.”Mango will operate on state subsidies, and will not be obliged to show a return.That makes it unfair in our view, and puts pressure on the rest of us.”Both 1time and fellow no-frills competitor Kulula have already been forced to drop their prices.Kulula chief executive officer Gidon Novick described Mango as “basically an extension of SAA”, saying it “will eventually result in SAA losing even more than it is currently losing”.Mango was created, he said, with the intention of destroying the existing competitive environment.”Many taxpayers out there are very frustrated and worried about where their money is being spent.”Professor Wessel Pienaar, head of the University of Stellenbosch’s logistics department in Cape Town, said he doubted the low ticket prices would be sustainable or that Mango would be a viable enterprise without its SAA “umbilical cord”.”A quick calculation shows 450 rand to be a feasible average price for a one-way ticket between Johannesburg and Cape Town with a 90 per cent plane occupancy rate and all taxes included,” he said.While the new carrier might succeed in making flying affordable for South Africa’s upcoming middle class, at least in the short term, Pienaar said the negative aspects around Mango’s creation outweighed the positives.”From a socio-economic perspective, the move was precarious.This is public money that could have been better spent elsewhere, and there is the risk that the taxpayer may end up having to bail the airline out.”Mango spokesman Hein Kaiser pointed out that the 100 million rand had to be paid back over five years at market-related interest rates.”There is no truth in these rumours of cross-subsidisation,” he said.Nampa-AFPWith ticket prices as low as 169 rand one way, some 80 000 tickets were snapped up in its first week in spite of problems accessing both the airline’s website and call centre.But if travellers are delighted by the battle of the skies, Mango’s competitors are less than happy that the latest entrant into the market has taken flight with a R100 million cash injection from the state-owned SAA.”It is always good to have more competition, but that competition must be fair,” said Glenn Orsmond, chief executive of rival carrier 1time.”Mango will operate on state subsidies, and will not be obliged to show a return.That makes it unfair in our view, and puts pressure on the rest of us.”Both 1time and fellow no-frills competitor Kulula have already been forced to drop their prices.Kulula chief executive officer Gidon Novick described Mango as “basically an extension of SAA”, saying it “will eventually result in SAA losing even more than it is currently losing”.Mango was created, he said, with the intention of destroying the existing competitive environment.”Many taxpayers out there are very frustrated and worried about where their money is being spent.”Professor Wessel Pienaar, head of the University of Stellenbosch’s logistics department in Cape Town, said he doubted the low ticket prices would be sustainable or that Mango would be a viable enterprise without its SAA “umbilical cord”.”A quick calculation shows 450 rand to be a feasible average price for a one-way ticket between Johannesburg and Cape Town with a 90 per cent plane occupancy rate and all taxes included,” he said.While the new carrier might succeed in making flying affordable for South Africa’s upcoming middle class, at least in the short term, Pienaar said the negative aspects around Mango’s creation outweighed the positives.”From a socio-economic perspective, the move was precarious.This is public money that could have been better spent elsewhere, and there is the risk that the taxpayer may end up having to bail the airline out.”Mango spokesman Hein Kaiser pointed out that the 100 million rand had to be paid back over five years at market-related interest rates.”There is no truth in these rumours of cross-subsidisation,” he said.Nampa-AFP

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