If new, low-cost airline SAA’s Mango is a threat to kulula’s owner Comair, investors don’t believe it. In fact, the market reaction to Mango was simply to buy more Comair shares.
Mango bookings opened at midnight on October 30 and by 9am on Wednesday the new airline had already sold 30 000 tickets, Mango spokesperson Hein Kaiser said. The airline had made 30 000 tickets between Durban and Cape Town available at R169, and 60 000 tickets available at R250, for flights between November 15 and the end of the year.
The rush for tickets meant that there was insufficient bandwidth for the amount of people trying to visit Mango’s website, while the call centre also struggled to cope.
Although thousands of South Africans have been furiously clicking on Mango’s website, investors have not been swayed. On Monday, when Mango launched, Comair closed at R205, up from R190 the previous Friday. The market was clearly not rattled by the entrance of a new player.
But only between five and 45 seats on each plane would be sold at less than R200. Mango CEO Nico Bezuidenhout said that between 3% and 25% of seats would be sold at the special price.
Kulula.com’s response was to offer domestic fares starting at R168, also on a limited number of seats, from November 15. “We want to send a clear message that after inventing low fares in South Africa five years ago, we will remain price leaders in the market even if we create a bit of fruit salad in the process,” said joint CEO Gidon Novick.
Kaiser said Mango aims to be 20% cheaper than its competition over the longer term. He said the airline’s cheap offerings were “totally sustainable” for three reasons: Mango was using Boeing 737-800s, which are 15% more fuel efficient than other airplanes, the Boeings would spend more time in the air and allowed a better seat configuration, with 186 seats per aircraft — although Kaiser admitted that each passenger would sacrifice “about two inches of legroom”.
But not everyone will get the cheap seats, despite having less legroom.
Like kulula.com and 1Time, Mango will have different price tiers. “The most expensive a ticket could be would be R990 on the Jo’burg to Cape Town route.
“That’s the worst-case scenario,” said Kaiser. 1Time’s top price is R1 199 on the same route, which is also kulula.com’s top price.
Kaiser said Mango was using the same business model as successful no-frills airlines such as RyanAir and Southwestern. In fact, Kaiser said, the seat configuration was exactly the same and they used the same Boeings. “It cannot fail,” he said confidently.
Mango was launched with a R100-million shareholder’s loan from SAA, but will operate independently. Kaiser was adamant that taxpayers’ money would not be used to shore up the airline, saying it would repay the loan.