Low-cost airlines set for war

2006-10-31 22:57

Johannesburg - Two competitors of SAA's new low-cost airline are reducing their fares in reaction to Mango's cheap offers.

"We're obviously going to play their game during the launch," said 1Time airline's marketing director, Rodney James, on Tuesday.

"We did the same thing (when we launched), then you've got to settle down and run the business and make a profit. Let's see what happens after the fun and games."

Mango CEO Nico Bezuidenhout said on Tuesday the airline's launch had seen an "unprecedented wave of enthusiasm".

The airline's website had seen 15 000 availability queries during the first 10 minutes after booking opened at midnight.

Soaring ticket sales

By mid-morning on Tuesday, 11 000 confirmed reservations had been made at Mango's call-centre, which opened at 06:00.

Bezuidenhout said: "The high call volumes, web impressions and soaring ticket sales prove the market is hungry for a priced-right airline such as Mango."

>Mango spokesperson Hein Kaiser said they were aimed largely at reaching the "unflown".

Gidon Novick, joint CEO of Comair, which runs Kulula, said the airline would undercut its prices for all of its eight routes, with the lowest fare at R168. This was, however, for a limited number of seats.

1Time's Rodney James said Mango's prices would lose Mango between R200m and R300m a year.

Mango was offering one-way tickets from Johannesburg to Cape Town and Durban for R169.

1Time's offering for the same ticket ranged between R165 and R549 in January. December prices were R999.

According to its website, Kulula's January prices ranged between R168 and R248. December one-way tickets cost between R859 and R1 399.

James said there was some concern that Mango had been given a R100m loan from SAA. "If we had that kind of money we could probably start three or four airlines," he said.

There were also concerns about SAA's anticompetitive practices. Since December 2005, the competition commission had fined SAA twice, first R60m, then R45m, for fixing ticket prices and abusing its dominant position in the market.

Nationwide airline's financial director Peter Griffiths said that "at the moment" they were not looking at reducing their prices.

" We'll have to look at if we're affected (by Mango's price cuts)."

Will be able to sustain low prices

Kaiser said the airline's pricing and business model was "highly sustainable".

"The offer on the website is obviously a launch offer, but I can't foresee that the increase in price will be substantially higher."

He said the airline's prices for Johannesburg-Cape Town flights for next year were R249 and he foresaw that they would stay at this level.

"We will be able to sustain (our low prices), absolutely... There's definitely room in the market for another player."

- SAPA