Feathers ruffled as SAA concedes to subsidising Mango
Over the weekend it said in a statement that it had sub-leased ten planes to Mango.
JOHANNESBURG - Low cost airline FlySafair says it's concerned about the apparent concession by South African Airways (SAA) that it has been subsidising the low-cost airline it owns, Mango.
SAA has always denied subsidising Mango, but over the weekend it said in a statement that it had sub-leased ten planes to Mango, at a significantly discounted cost while paying the market-related premium to the owner of the planes.
It was responding to the resignation of mango CEO Nico Bezuidenhout.
FlySafair's Kirby Gordon says this concession by SAA means it could have been paying up to 40 percent of Mango's costs.
"Having that subsidised by the state, should that have been the case, would put the operator at a huge advantage when it comes to competing in the market."
Transport economist Joachim Vermooten says it's clearly distorted the market.
"People expect low cost airlines to have a lower cost, resulting in lower prices, which should be based on efficiency and not from subsidies."
He says this means it would have been very difficult for other airlines to compete with Mango.
Meanwhile, the Democratic Alliance has said it wants to complain to the competition commission.