George – The price war in the South African low cost airline industry will most likely continue until one or more of the current four carriers exit, Mango CEO Nico Bezuidenhout told Fin24 on Friday at the 45th annual general assembly of the Airlines Association of Southern Africa.
“This market is over traded and over supplied. The average load factor in the SA industry is below 80%, while in a more mature market like the US, for instance, it is over 83%,” he said.
This additional supply has created pressure on price points and has led to the price war among the low cost carriers.
“Any airline that prices consistently below cost will have to eventually exit, unless some supply is pulled out or more demand kicks in. There is nothing in the SA economy, however, indicating possible demand in growth,” explained Bezuidenhout.
“So, the carriers in a better financial state, with more reserves and strong brands will survive. Mango has the lowest cost base in the SA industry. We have the highest aircraft utilisation and the highest people productivity.”
He said Mango also has the broadest distribution network in Southern Africa, good service levels and a brand that has been around for nine years. The airline is actually approaching the size of SAA.
Bezuidenhout, who is back at the helm of Mango after a 9-month stint as the acting CEO of South African Airways (SAA), is confident that Mango will be one of the four players to remain in the end.
“I am happy to be back in the Mango fold. The business continues to do well and we are maintaining profitability. Passenger volumes are growing more than 20% year-on-year and we are growing our fleet and routes,” said Bezuidenhout.
Bezuidenhout has been with Mango since its start in 2006 and affectionately refers to the airline as his “baby”.
In two weeks, for instance, Mango is launching a route between the Lanseria airport in Johannesburg and Durban. The closure of its route between Cape Town and Port Elizabeth will be replaced by an increased capacity between Cape Town and the Lanseria airport.
Regarding his time at SAA, Bezuidenhout said he is happy with the work done while he was at the helm.
“During that time we implemented the very important 90-day action plan, which had benefits for the airline. In the new fiscal year SAA is also performing, [with] bottom line 45% better than the previous comparable period,” explained Bezuidenhout.
“SAA continues to focus on restructuring and has made advances on revenue and structural improvements - although the prior comparison is with a particularly bad period.”
In his view the management at SAA is focusing on the right things.
* Carin Smith is the guest of Aasa at its annual general assembly.