MANGO, the low-cost subsidiary of loss-making SAA, will be closing its books with an operating profit at the end of this month, according to ceo, Nico Bezuidenhout.
 
Speaking at the Aviation Outlook Africa conference in Cape Town on Wednesday, he didn’t elaborate on the extent of that profit pending an audit, but said he hoped it would be in the millions and similar to that declared by Comair.  Mango’s financial year ends at the end of March, but the official announcement was only expected in April/May, Bezuidenhout said.
 
He said Mango had carried 3,5m passengers in the first two years of its existence and had gained a 20% market share against other domestic low-cost competitors, whilst having grown the market by 16,5% overall. He said average load factors were 86% and in December 2008 went up to 96%. He ascribed this to a migration of business travelers from traditional legacy carriers to Mango, and not necessarily just from SAA.
 
Bezuidenhout said Mango was interested in expanding its low-cost operation further into Sub-Sahara Africa, particularly to leisure destinations such as Victoria Falls and Dar es Salaam, but said continued air space restrictions over Africa made this impossible at this stage. He said consumer behavior patterns had not yet changed sufficiently to make a low-cost long haul operation from South Africa feasible, especially against competition from Middle East carriers. 
 
Speaking on how to be profitable in a cut-throat, depressed market, Bezuidenhout said Mango’s typical costs were as follows: 7-10% airport charges; 5% ground handling charges; 5% navigation charges; 10-20% capital costs; 10% labour costs; and 40-50% fuel costs. Mango’s solution was to spread airport and ground handling related charges among more passengers; heighten productivity to address labour and capital costs; and use new generation, more fuel-efficient aircraft to address fuel costs.
 
Other challenges were the small size of the domestic market; the low propensity for travel; and low credit card and Internet penetration in the domestic market. Mango tackled this by demystifying air travel, educating the traveling public and using non-traditional distribution channels such as retail outlets, making travel a commodity like anything else.
 
He said Mango faced the challenges of fierce low-cost carrier competition by differentiating itself by being cost effective, accessible, a price leader and offering value. All Mango staff was employed on a contract basis and required to multi-task, and there was no hierarchy among them.