SAA might slip on Mango

14 June 2016 - 09:41 By Bloomberg

South African Airways has said it subsidised its low-cost entity Mango Airlines by sub-leasing planes at a discount to market value, a move that may have given the latter an advantage in the competitive budget market. The state-owned carrier sub-leased Mango all 10 of its aircraft "at a significantly discounted cost", while paying the leasing company the market rate, SAA said.Mango was launched in 2006.The move was a "necessary investment" to support the low-cost entity, SAA said.SAA's comment on sub-leasing planes to Mango comes after last week's resignation of the budget airline's CEO, Nico Bezuidenhout, who will become the head of Africa-focused carrier FastJet plc from August 1.The company will announce an acting CEO "as soon as it is practically possible to do so" and will start a search for a permanent appointment.The DA yesterday said it would request that the Competition Commission investigate possible collusion between SAA and Mango, and any loss of profit and cost to the taxpayer as a result.The ability to sub-lease planes at a discount would give Mango an advantage over new entrants to the market, Erik Venter, CEO of British Airways franchisee Comair, told Business Day.SAA has previously said all interactions between Mango and its parent were at arm's length, Venter said.A Mango spokesman referred questions on the plane leases to SAA.SAA has been surviving on government debt guarantees and last posted a full-year profit in 2011.SAA is also at the centre of two damages claims by Nationwide and Comair, which are claiming R35-million and R1-billion respectively, for breaches of the Competition Act...

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