THERE is delicious irony in the statement
issued by South African Airways (SAA) over the departure of Nico
Bezuidenhout, the CEO of its low-cost subsidiary Mango.
While wishing him well, it also tries to undermine him.
Lest it be thought that Bezuidenhout built and operated a more efficient and profitable airline than its parent over the past decade, SAA hints that he didn’t.
Amid reports that SAA chairwoman Dudu Myeni was about to investigate Bezuidenhout yet again, the airline said in the statement sent out on Saturday that there was no "nexus between Bezuidenhout’s resignation and internal investigations across the group".
It reminded us that it had defended Bezuidenhout when his academic qualifications were twice overstated in annual reports, prompting public scrutiny.
But in the past, Myeni did investigate Bezuidenhout and Mango, even though previous investigations had found nothing untoward.
Nevertheless, in a tone that can best be described as snide, SAA assures us that Bezuidenhout’s departure will make no difference to Mango.
And then comes a really startling admission.
SAA revealed: "As an initial investment to subsidise the start-up of Mango Airlines, SAA subleased 10 aircraft, at a significantly discounted cost to Mango Airlines, while continuing to pay the market-related premium to the lessor."
The inadvertent admission is likely to provide ammunition to its competitors.
The national carrier has spent a lot of time at the competition authorities in the past decade, often losing cases for abusing its dominance, and engaging in a variety of anti-competitive behaviours.
It is currently fighting in the courts damages suits brought by rivals Comair and Nationwide relating to competition issues. If it loses both cases, SAA could be in for more than R1.3bn in damages.
Comair and other low-cost airlines have long been concerned that 10-year-old Mango was being subsidised covertly, giving it an unfair advantage in the low-cost airline market. But SAA has always insisted all transactions between it and Mango were at an arms-length basis.
Evidently not, by the airline’s own admission.
Competition lawyers say the discounted leasing deal could be a form of predatory pricing, in which Mango is charging ticket prices that are lower than the actual costs it incurs on its fleet.
SAA’s overt admission could provide the basis for a case to be brought against it for abusing its dominant position in the low-cost airline market.
However, tempted as we might be to crow over SAA’s apparent own goal, the statement is more tragic than comic.
Given SAA’s desperate financial state and Myeni’s apparent imperviousness to any efforts to unseat her, or bring proper governance to the ailing airline, it means the one bright spot in the group has dimmed.
It is not clear what Mango’s financial position would look like without the leasing deal, as it never published financial statements and merely issued statements proclaiming low-budget carrier’s successes.
Comair CEO Erik Venter is convinced that Mango is, in fact, operating at a loss.
It is, therefore, quite possible that we now have not two, but three loss-making, state-owned airlines.
Billions of taxpayers’ money have already been sunk in efforts to bail out SAA and the latest disclosure adds to the story of wasteful expenditure on state-owned assets.
It adds, too, to concerns that it is impossible for private sector operators to compete fairly in the low-cost airline market space.
Meanwhile, Bezuidenhout is joining Fastjet, the London-listed low-cost carrier focusing on Africa. We hope his success at Mango was not just a mirage.
While wishing him well, it also tries to undermine him.
Lest it be thought that Bezuidenhout built and operated a more efficient and profitable airline than its parent over the past decade, SAA hints that he didn’t.
Amid reports that SAA chairwoman Dudu Myeni was about to investigate Bezuidenhout yet again, the airline said in the statement sent out on Saturday that there was no "nexus between Bezuidenhout’s resignation and internal investigations across the group".
It reminded us that it had defended Bezuidenhout when his academic qualifications were twice overstated in annual reports, prompting public scrutiny.
But in the past, Myeni did investigate Bezuidenhout and Mango, even though previous investigations had found nothing untoward.
Nevertheless, in a tone that can best be described as snide, SAA assures us that Bezuidenhout’s departure will make no difference to Mango.
And then comes a really startling admission.
SAA revealed: "As an initial investment to subsidise the start-up of Mango Airlines, SAA subleased 10 aircraft, at a significantly discounted cost to Mango Airlines, while continuing to pay the market-related premium to the lessor."
The inadvertent admission is likely to provide ammunition to its competitors.
The national carrier has spent a lot of time at the competition authorities in the past decade, often losing cases for abusing its dominance, and engaging in a variety of anti-competitive behaviours.
It is currently fighting in the courts damages suits brought by rivals Comair and Nationwide relating to competition issues. If it loses both cases, SAA could be in for more than R1.3bn in damages.
Comair and other low-cost airlines have long been concerned that 10-year-old Mango was being subsidised covertly, giving it an unfair advantage in the low-cost airline market. But SAA has always insisted all transactions between it and Mango were at an arms-length basis.
Evidently not, by the airline’s own admission.
Competition lawyers say the discounted leasing deal could be a form of predatory pricing, in which Mango is charging ticket prices that are lower than the actual costs it incurs on its fleet.
SAA’s overt admission could provide the basis for a case to be brought against it for abusing its dominant position in the low-cost airline market.
However, tempted as we might be to crow over SAA’s apparent own goal, the statement is more tragic than comic.
Given SAA’s desperate financial state and Myeni’s apparent imperviousness to any efforts to unseat her, or bring proper governance to the ailing airline, it means the one bright spot in the group has dimmed.
It is not clear what Mango’s financial position would look like without the leasing deal, as it never published financial statements and merely issued statements proclaiming low-budget carrier’s successes.
Comair CEO Erik Venter is convinced that Mango is, in fact, operating at a loss.
It is, therefore, quite possible that we now have not two, but three loss-making, state-owned airlines.
Billions of taxpayers’ money have already been sunk in efforts to bail out SAA and the latest disclosure adds to the story of wasteful expenditure on state-owned assets.
It adds, too, to concerns that it is impossible for private sector operators to compete fairly in the low-cost airline market space.
Meanwhile, Bezuidenhout is joining Fastjet, the London-listed low-cost carrier focusing on Africa. We hope his success at Mango was not just a mirage.
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