Mango is proof that a state-owned airline can be productive, profitable - CEO Nico Bezuidenhout
State-owned low-cost airline Mango recently celebrated its 13th birthday. It is 100% owned by struggling flag carrier South African Airways, but operates independently with its own board and balance sheet.
CEO Nico Bezuidenhout, who was at the helm of the the low-cost carrier from its start until 2016, and again as from October this year, told Fin24 that Mango doesn't have recourse to bailouts and public funding.
It has transported 29 million passengers and created jobs for more than 800 people, he says.
"All our employees know that our future depends on the commercial viability of Mango. That is what drives the culture we created. We don't have recourse to bailouts and public funding. It is a team effort. We don't have a hierarchy with management in an ivory tower. We also don't have silos," he says.
"When SAA employees were on strike recently, I was so proud of Mango. We got every passenger to their destination and even improved our on-time rate. Mango employees refused to join in a sympathy strike as they know it would impact their livelihood. We have had no restructuring at Mango."
Bezuidenhout says Mango has paid a total of R4.8bn in airport taxes and VAT, R3bn in airport fees and more than R4bn in maintenance costs.
"With Mango we set out to improve affordability in SA aviation. Also, Mango does not only carry passengers around, but also stimulates economic activity in SA, which is what it is meant to do," says Bezuidenhout.
He was given R100m to start Mango and his mandate was clear: if you lose this money, you are done for.
Returning to Mango
Since his return as CEO in early October, a process has started of probing the supply chain, engaging with suppliers and looking at cost efficiency to try and achieve cost reductions of between 10% to 30%, he says. This process is expected to have been completed by December 15.
Over the past 18 months, ahead of his return, the airline took on four additional aircraft. But SAA Technical (SAAT) was "a sub-optimal maintenance provider", according to Bezuidenhout. This led to a situation where up to 10 of Mango's 14 aircraft were non-operational at certain times.
Over the last six weeks, however, Mango has mostly been fully operational. According to Bezuidenhout, the airline has increased its oversight at SAAT which has helped with its on-time performance and improved maintenance planning.
"If aircraft are not in the sky, an airline cannot make money. It must also have the correct routes to be profitable. Of course, there has been ups and downs at Mango. The business has, over last two years, not been profitable and experienced some tough times," he said.
Bezuidenhout says he cannot disclose any financial information, as this will have to be released as part of SAA's group results, which have recently once again been delayed.
Asked about the low-cost airline industry in SA, Bezuidenhout says it has always been a volatile sector, highly traded and over-supplied. Currently, Mango, Kulula.com and Safair have about 60% of the domestic market, he says.
"It is all about price and reliability. Carriers that deliver on that will win at the end of the day," he says. "An airline can be state-owned and be sustainable. Mango has shown that in the past. We reduced the cost of air travel and made it more affordable so that more South Africans can fly."
For him a key measure to look at is not the number of employees an airline has in relation to its number of aircraft, but rather the number of employees in relation to the number of passengers an airline has flown.
For Mango that is 5 500 passengers per employee per year, which, according to Bezuidenhout, compares well to that ratio at other local airlines, both state-owned and private.
"Our ratio shows me that the Mango employees are productive. It is all about efficiency and productivity of an airline's assets, people and supply chain. If an airline is more reliable, innovate and communicate well with its passenger base, it has the ingredients for a sustainable business," concludes Bezuidenhout.
SAA in "intense discussions" with lenders
While Mango employees kept working during last month's SAA strike, the week-long industrial action by members of the National Union of Metalworkers of SA and the SA Cabin Crew Association "caused immense damage to the reputation, operations, and the deterioration of the finances of SAA, according to Minister of Public Enterprises Pravin Gordhan.
Gordhan, in a statement released on Sunday evening, said the national flag carrier was in "intense discussions" with lenders to secure much-needed funding and will go through a "radical restructuring process" to ensure its financial and operational sustainability.
The strike, which SAA says cost SAA R50m per day, ended on November 22.