South Africa: Mango Low-Cost Airline - a Story of Profitability That Is Too Good to Be True?

opinion

It appears unlikely that all Mango's expenses have been accurately reflected in its accounts and that perhaps the SAA Group, with the assistance of some creative accounting, has been of the view that a more palatable story to sell taxpayers and the Department of Public Enterprises is of a group with one profitable carrier as opposed to two loss-making airlines.

Since its incorporation in 2006, the narrative of profitability and self-sufficiency of state-owned enterprise (SOE) low-cost carrier Mango has been unflinchingly communicated by its board to a financial media that have simply regurgitated the same. Little or no effort has been made to establish whether the Mango "success story" is probable or even possible in the environment of paper-thin margins in which low-cost carriers the world over operate.

The absence of margin fat means that key metrics such as passenger load factors, aircraft fuel efficiencies, staff productivity per passenger and number of staff per aircraft are paramount while the generation of significant ancillary streams of revenue outside the original air ticket price is critical to sustaining any modicum of profitability and sustainability.

When things are too good to be true, they generally are, and the Mango success story of profitability...

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