FlySafair CEO: Buying Mango will keep prices low | Fin24

FlySafair CEO: Buying Mango will keep prices low

Nov 17 2016 20:10
Adiel Ismail

Cape Town - Raising capital to take over Mango won't be tough, said FlySafair as it repeated its offer to take over loss-making Mango Airlines.

Mango Airlines, 100% owned by South African Airways (SAA) and which recently marked its 10-year anniversary, suffered a net loss of R36.9m in the year ended March 2016. The decline in profit comes after the airline made a net profit of R40.26m in 2013/14 and R38m in 2014/15.

Mango’s loss comes despite accusations of allegedly engaging in predatory pricing as it sub-leases aircraft from SAA at discounted prices, allowing it to price flights at below operational costs.

FlySafair CEO Elmar Conradie said on Thursday the carrier would buy Mango Airlines from the government at the right price.

“Mango’s fleet and operating model is closer to FlySafair’s low-cost approach, and would be a more natural extension to FlySafair’s successful business model," he said.

"Operating a larger fleet would afford us the opportunity to enjoy even larger economies of scale – and through this, sustain lower fares to the public.”

FlySafair first made public its interest in Mango after Finance Minister Pravin Gordhan announced government’s intention to sell off a minority share in a combined entity of South African Airways and SA Express.

Following the announcement, FlySafair issued a letter to the National Treasury and department of public enterprises stating that it had no particular interest in investing in the SAA/SA Express entity, but would purchase Mango, if the government was interested in such a deal.

"We received confirmations of receipt of our letters from both the minister of public enterprises and the treasury saying that they would take our offers under advisement," Kirby Gordon, FlySafair head of sales and distribution, told Fin24.

Raising capital to buy Mango won't be a problem, he suggested.

"Raising capital to support a good business model is never hard, especially when you have a proven track record to support your investment. Few people realise that Safair is actually a 51-year-old business with a long and proud legacy of operating specialised airlift services across the world."

The company behind FlySafair, Safair, has mainly been involved in maintaining aircraft and moving cargo.

"That side of our business is still alive and strong and operating missions across Africa and in fact Antarctica at present," Gordon said.

He explained that an easy win for a turn-around strategy would be around efficiency.

"In order to survive in aviation you have to reduce your cost per seat as much as possible. This is about utilising your aircraft and crew efficiently during a flying day and by ensuring that you work to appropriately match your capacity to where the demand lies," said Gordon.

"So far we've done a good job of this and after evaluating the Mango results it seems fairly clear that we are achieving better cost per seat efficiencies than them presently. This despite alleged subsidisation from SAA."

READ: Low-cost airlines react to SAA, Mango 'collusion' allegations

Gordon added that the carrier is well-positioned to meet the increasing demand in domestic travel that has been reported by the Airports Company SA.  

Since FlySafair launched operations two years ago, average fares on routes operated by FlySafair are up to 39% cheaper than they were five years ago, with fares starting from as low as R499.

An interesting part of FlySafair’s offer is that you can buy a basic ticket – without food, drinks and luggage – and then build on it by deciding on the other items you need to buy. This reduces the cost of the airline ticket

“As it stands, we are achieving a pleasingly low operating cost per seat, which is allowing us to contest the market at the current low fares," said Gordon.

He said selling Mango would reduce the financial burden on the government.

FlySafair expects to turn a profit in the second half of this year, according to Fin24's sister site, City Press.

Read Fin24's top stories trending on Twitter:

flysafair  |  saa  |  mango  |  airlines  |  mergers and acquisitions  |  aviation


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