The FINANCIAL — The report was released to coincide with one of the aviation industry’s largest conventions and lists airline growth for the period 2010 to 2014.
During the four year period Mango is listed as achieving 71.3% in capacity growth, 32% ahead of its traditional rival Comair. For 2014 the report also notes that Mango led annual growth in the low cost sector with an increase of 12.2%, according to Mango.
Mango CEO Nico Bezuidenhout ascribes the airline’s growth to competitive network planning and innovation countered by prudence. “Over the past 9 years Mango has grown significantly but,” he says, “the business has at all times approached a volatile market prudently. Through continued network planning and review processes Mango has been able to respond positively to market conditions during some of the most challenging periods in aviation.” The airline’s bet on innovative technology has also paid dividends with its mobile apps, wide payment acceptance methods and aggressive distribution strategy.
Something’s got to give. Bezuidenhout says that despite Mango’s continued upward curve, the South African domestic aviation industry cannot sustain four low-cost airlines. “The market presents an enormous challenge to airlines at this time,” notes Bezuidenhout. “There is an oversupply of capacity on trunk routes, particularly between Johannesburg and Cape Town, and while consumers presently benefit from competitive pricing, it is unsustainable for airlines in the medium to long term.” Year on year the domestic aviation market has grown by 2% while available capacity grew by 7% creating a 5% oversupply.
Airlines depend heavily on positive cash flows and underpricing forces spend of forward sales. “We have seen now-defunct airlines engage in unsustainable pricing simply chasing load factors. It did not last long. Today, we are seeing it again and this is not a sign of a healthy industry.” Bezuidenhout anticipates that natural attrition will return stability to the industry as startup airlines may either change strategic direction or reduce capacity on overtraded routes. “The commercial viability of a route like Johannesburg Cape Town in current conditions has been exhausted,” he says.
Mango presently carries an average network load factor of between 75-80%, including Johannesburg and Cape Town. However, says Bezuidenhout, the airline is focusing on developing other routes at this time, Mango’s new Lanseria Durban addition is testament to its focus. “We have directed our attention to developing other points in our network along with other innovative and strategic commercial tactics while remaining competitive on overtraded sectors,” says Bezuidenhout. He adds that there is still room for growth domestically but, margins will remain thin. “Average airline margins remain around 0.5-2%, dependent on route and I foresee competition intensifying before the industry normalizes.”
Mango will continue to pursue growth on all counts. “Mango will continue to aim for an upward curve in a fiercely competitive market.”
Discussion about this post