Mango Airlines South Africa

Soft landing for cost of flying

Given the small margins South Africa’s low-cost airlines operate on, the looming Acsa (Airports Company South Africa) tariff hikes are widely expected to be passed on to the long-suffering customer, making it hard to be sure you bagged that bargain after all.

Increased e-commerce in recent years has led to SA consumers being more comfortable booking and buying online.

And today, with travel, the internet is pivotal. We use it to research destinations, accommodation, prices, and even to make our actual bookings instead of going to a traditional travel agent. Whether it is because we are time-poor, fearful of biased advice, or simply feel we are better informed than a travel agent, the internet has become the new landscape for our travel needs.

This has led to a proliferation of travel websites popping up in recent years, and entrepreneurs are now also getting in on the act alongside airlines such as Kulula, Mango and 1time. SAflights, CompareTravel and Travelstart are among those who have moved into the market. Online-only flight “aggregators” use search technology that scoops up all available flights and presents them ranked by price, duration or other criteria.

Marc Samouilhan, CEO of CompareTravel.co.za, says users of his site can be assured that “the cheapest option is always presented to you, even if it means two one-way flights on different airlines. And it is possible to combine these two flights into one booking, so it’s easy, and more importantly, transparent – you can see that you’re saving money. No one else offers this.

“Internet penetration has hit a tipping point in South Africa and is now big enough to sustain an online-only business. We have seen traffic rise by 160 percent in our first few months.”

However, the outcome of the Independent Regulating Committee’s ruling regarding higher airport tax looms ominously over the industry. Acsa has applied for a tariff increase of between 160 and 190 percent over the next five years. The economic regulator has yet to announce the percentage increase for this year. Such a big burden could jeopardise the industry’s ability to grow and threaten the competitiveness of South Africa as a destination.

Samouilhan prefers to see things positively: “The modern consumer both privately and in a business capacity is very value conscious, and we’re finding that when a customer has found and used us once, they come back.

How Mango Airlines has Succeeded in Customer Engagement ...

Almost everyone reading this blog books most of their airline tickets online. Without question, it is the easiest and most cost-effective way (for all parties involved) to make a booking. So it makes sense that a start-up airline would focus its distribution strategy around direct online sales. However, imagine if you were tasked with launching an airline in a market where only 10 percent of the people have reliable Internet access. And of those, a small percentage trusted online payment systems. What would that do to your customer engagement and distribution strategies?

I had the great opportunity to interview Nico Bezuidenhout, the CEO of South Africa’s Mango Airlines who faced the exact challenge described above, at Aviation Outlook Africa Summit in Johannesburg. I have highlighted different topics we discussed below, with the full video interview available at the end of this post.

Mango was launched in 2006 with a very specific task: expand South Africa’s aviation market. In what was already a relatively small market to begin with, Mango was diving into direct competition with both an established legacy (South African Airways) and low-cost carrier (Kulula) that seemed to have both ends of the market covered. So Mango built a cost structure that made air travel accessible to South Africans to whom it was previously just a dream, and therefore was able to elbow its way into the crowded market.

But creating the airline and flying the planes is only half the battle. How did Mango sell enough seats to become successful, considering the majority of those potential first-time flyers fell under that 90 percent of the population without online access?

For most of the world, we know of a few ways to book air travel. If we can’t do it through an airline’s website, we know of other online booking engines we can go to. If that doesn’t work, we probably know of a local travel agent, or an airline’s local office. But would you ever consider adding an airplane ticket to your grocery list?

Because Mango knew that many of it’s desired first-time travelers were not online, they went to where these people did congregate—selling tickets through grocery stores and other retail outlets. Because only 10 percent of the South African market has a credit card (another challenge) , it also developed an innovative credit scheme where it would accept credit purchases through some of these retailers. As a result, Mango was successful in doing exactly what it set out to do—make air travel accessible to people to whom it previously was not—effectively creating a new market segment.