Is Mango playing fair? A full review.
Complaints have been flying (excuse the pun) from Kulula and 1Time about Mango Airlines' unfair pricing (Kulula even offering to throw a party when Mango turns a profit). Considering that Mango Airlines is a direct competitor of Kulula and 1Time, this is a bit like the Springbok rugby captain complaining about the All Blacks unfair play at the point of breakdown. We therefore decided to conduct an independent investigation into these allegations.
We had a look at the flight pricing history of the 4 South African low cost carriers (1Time, Kulula, Mango & Nationwide) to see whether there is any evidence of Mango's underpricing in the surveys we've conducted. We ignored British Airways and SAA as they operate in a different market.
Mango Airlines charges the lowest average prices
Out of the 13 SouthAfrica.to surveys (see Appendix at end of article for details) conducted since April 2007, Mango Airlines offered the cheapest flight 3 times - hardly the track record of an airline which is doing a lot of undercutting. On the other hand Mango Airline had the most expensive flight only once out of the 13 surveys. The clearest evidence comes from an examination of the average flight prices - Mango has on average charged the lowest prices for its flights - R14 less than Nationwide, R41 less than 1Time Airline and a full R99 less than Kulula.
Average flight prices |
1Time |
Kulula |
Mango |
Nationwide |
|---|---|---|---|---|
R587 |
R645 |
R546 |
R560 |
Further evidence that Mango has been undercutting the others is the fact that, in the survey of the 15th July 2007 Mango was the only airline which had its flights sold out.
National carriers & misplaced pride
The need to have a national carrier is often driven by national pride. However, there's nothing special about a carrier which can only compete as a result of policies which restrict competition, and a carrier which cant even pay its own way is a national disgrace, certainly not an entity to be proud of.
This is not to say that there's no place for government in the aviation industry - it has a valuable role to play in ensuring a well regulated competitive industry. A first step in creating a competitive environment is the establishment of open-skies policies, agreements with other countries whereby carriers based in South Africa can fly into their airports and vice versa.
So, should government ever set up its own carrier? Well, if private carriers are running excessive profit margins it makes sense to take measures to restore normality in flight prices; the last and most drastic of these measures would be for the government to open its own carrier.
What is a well-behaved a national carrier?
Prevents excess profiteering
A big part of a national carrier's mission should be to (1) identify routes where excess profiteering is taking place, and (2) to compete on those routes with a view to returning flight pricing to a state of normality. A good example of this is SAA's increasing its (profitable) flights from Johannesburg to Sao Paulo. This strategy of flying on routes where there is excess proftiabiliity has the added benefit of ensuring a profitable national carrier.
Reasonable stable pricing
The aim of the national carrier is to return pricing to a state of normality. Government should set the national carrier a target flight price (e.g. cost + 10%), and the national carrier's aim should be to return pricing to the target flight price by setting its own prices at the target flight price - this will force more expensive airlines to drop their prices to the target flight price. The national carrier should not price below the target flight price as this will drive other airlines out of business (which means government cant meet its objective of creating a competitive reasonably priced airline industry).
Transparency and accountability
National carriers are owned by and are accountable to the public. Regular accounts should be set up illustrating how they are meeting their mandate - items which should be open for scrutiny are a breakdown of their estimate of the cost of flying different routes and the actual flight prices on those routes. It is encouraging that SAA is starting to provide information about which of its routes are profitable (with Mango there is a complete lack of information).
Flexibility
A national carrier's job is a temporary one - once it has restored a normally priced competitive environment on flight routes it should look at downscaling its operations there and moving its planes and personnell to other more profitable routes where its serviced are required (or even selling up if there is a state of permanency about the pricing and competitiveness of the market).
Is Mango succeeding us?
Mango Airlines completely lacks the transparency accountability of its costing, profit margins and strategy that one should expect from a national carrier. There are numerous examples where it has sold tickets below cost-price (the R1 Mango ticket sale being but an example thereof).
On the other hand Mango hasn't been set a mandate to achieve the above - we, the people (who are the owners of Mango) represented by the government are responsible for this task.
Appendix A: Flight prices in past surveys
Survey date |
Flight route |
1Time |
Kulula |
Mango |
Nationwide |
|---|---|---|---|---|---|
Johannesburg to Cape Town flights |
R549 |
R599 |
R499 |
R849 |
|
Cape Town to Durban flights |
R649 |
R869 |
R548 |
R484 |
|
R329 |
R329 |
R349 |
R372 |
||
Cape Town to Johannesburg flights |
R549 |
R499 |
R548 |
R481 |
|
R649 |
R999 |
R849 |
R600 |
||
Johannesburg to Durban flights |
R849 |
R849 |
R599 |
R596 |
|
Johannesburg to Cape Town flights |
R499 |
R599 |
R549 |
R869 |
|
R1199 |
R869 |
R851 |
R688 |
||
Durban to Johannesburg flights |
R329 |
R329 |
R551 |
R374 |
|
R449 |
R499 |
R301 |
R483 |
||
Durban to Cape Town flights |
R649 |
R869 |
R477 |
not working |
|
R429 |
R629 |
R427 |
R402 |
||
R499 |
R443 |
¹ |
R516 |
¹ Sold out