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SAA competitors could benefit from shift of flights to Mango - expert

By: Graphic Business
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If there is no decrease in overall flights [within the group], it implies a shift of operations from SAA's domestic services to its low-cost subsidiary
If there is no decrease in overall flights [within the group], it implies a shift of operations from SAA's domestic services to its low-cost subsidiary

 THE decision by South African Airways (SAA) to shift a number of its flights to low-cost subsidiary Mango, could actually benefit the state-owned airline's competitors if it results in a reduction of SAA's overall activity, according to transport economist, Dr Joachim Vermooten.

Fin24 reported earlier that, according to SAA, despite changes to its flights between Johannesburg and Durban and Johannesburg and Cape Town, in practice this did not mean a reduction in flights from a group perspective.

Airline brands
Collectively, the two airline brands (SAA and Mango) continue to offer the same number of flights. SAA said its intention was to optimise the utilisation of its airline brands in a manner that promoted efficiencies to create financial sustainability.

Although the revenue of SAA has improved in the second quarter, its year-to-date revenue shortfall is still at R879m, Parliament's standing committee on finance heard in November last year.

Commenting on SAA's decision regarding shifting a number of flights to Mango, Vermooten told Fin24 that if these changes resulted in a reduction in overall activity by SAA, it would actually be to the benefit of its competitors due to capacity in the market being reduced.

Wide body aircraft
In the view of Vermooten, if SAA reduces the use of wide-body aircraft between Johannesburg and Cape Town, it would improve SAA's results, because those kinds of aircraft are designed for long-haul operations. On short-haul operations, the flight distance between the two cities is too short to recover the cost of take-off and landing.

"If there is no decrease in overall flights [within the group], it implies a shift of operations from SAA's domestic services to its low-cost subsidiary," Vermooten explained.

"SAA has to reduce its overall losses and secondly, there needs to be a settlement of the competition between SAA and its low-cost carrier Mango, otherwise there is an uneconomical overlap," he added. SAAnew/GB