SAA/Mango Cross Subsidisation: A Viewpoint


The media as expected, the unofficial evangelists of privatisation and the official opposition to South African Airways were blessed with joy and celebration at the resignation of the CEO of Mango Nico Bezuidenhout. It seems Christmas came early for many members of the Fourth Estate. From the onset, I am a firm believer that strong management and good governance are the necessary prerequisites that will make businesses to succeed be they public or private.

South African Airways has failed to perform because of instability at the top. Nico Bezuidenhout will become the CEO of FastJet and lead FastJet in its Africa development strategy. The question that we should be asking ourselves is what does the appointment as CEO mean for African aviation and secondly for SAA.

These are the questions many in the Fourth Estate will fail to ask, failing to scratch beyond the surface. Nico Bezuidenhout has acted as CEO of SAA on several occasions and has acquired skills, knowledge and competency when he was the CEO of Mango, therefore this is a great loss of institutional memory, in addition to being brain drain.

The media statement by SAA that SAA as parent company, has been assisting Mango as its subsidiary with favourable lease of aircraft, has many calling for a Competition Commission probe. South Africa is a constitutional democracy and they are free to exercise their democratic rights.

I dusted off my book shelve, a book titled South African Travel and Tourism Studies, and the chapter of my delight was ‘’kulula.com: now anyone can fly’’. Colin Diggines the author noted that ‘’in many cases infrastructure could be shared with Comair, which eased some of the pressure…Pilots were cross-utilised with the British Airways side, On the commercial side there are the commercial manager and a number of people that work with him who deal purely with the kulula.com brand. Senior management levels work with both brands, British Airways and kulula.com.

Most of them have been in the industry for a long time and provide valuable inputs into the development and management of the brand. The front-line staff deals only with the kulula.com product. They are trained to portray the image that is being developed for kulula.com. Behind-the-scenes staff is largely shared between the brands’’.

This valuable insight that Colin Diggines provides is completely oblivious to many of the esteemed members of the Fourth Estate, whose media gaze is captured by an obsession with privatisation and a passionate hate for SAA. The other fact related to media darling, Comair is that they have been having a joint CEO ever since. Fast forward to the launch of FlySafair in South Africa, the apple of the eye of the Fourth Estate, Comair launched a court application preventing the launch of FlySafair because of shareholding structure.

Mind you, this is the same Comair that is the biggest fan for competition, playing to the gallery, but when competition comes, it is completely oblivious to the calls for greater competition, engaging in court actions to stifle greater aviation competition. It’s interesting that when the Air Services Licensing Council sought to review whether Comair has more 75% local ownership as per the Act prescribed, the apple of the eye of the Fourth Estate engaged the courts.

It is worth noting that when FlySafair’s launch was grounded in October 2013 through the passionate interdict of Comair, the staff that were hired to operate the low cost carrier FlySafair were used on other operations of Safair, for the 10 month until it launched as noted by the journal article titled The Low Cost Carrier Bandwagon: Lessons for Skywise Airline. Safair is an aviation management and leasing company that has been in business for more than 50 years and was able to sustain the interdict by Comair through cross subsidisation of its interdicted subsidiary, FlySafair. This is not rocket science, ladies and gentlemen.

I don’t understand why when SAA has cross subsidied Mango, this becomes a national tragedy to members of the Fourth Estate. SAA and its subsidiaries provide public transportation (including the Gautrain), and SAA will never be privatised.  Maybe our Fourth Estate members should read Malcolm Rees’s article titled ‘’Has SA just been hoodwinked by fastjet?. That would be the beginning of the real conversation about FastJet and we know.

Mr. Unathi Sonwabile Henama is a tourism expert and writes in his personal capacity.


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