Tuesday, November 6, 2012

■ SOUTH AFRICA: War of words ensues as Gigaba defends Mango, attacks Venter over Comair's disdain for 1Time.

Comair LtdThe demise of LCC 1Time (T6) has led to a war of words between Comair Ltd's CEO Erik Venter and South African Minister of Public Enterprises, Malusi Gigaba.

Following 1Time's collapse last week, Venter issued a statement in which he alleged that 1Time's demise was partly the result of Mango, the South African government's LCC, undercutting it:
Due to the less efficient fleet it operated, the ultimate closure of 1Time was inevitable. However, we are certain that in the absence of state-subsidised Mango, 1Time would have made adequate profits to upgrade its fleet and be sustainable over the long term. Based on the previously released financial statements of SAA, and recent parliamentary comments, Mango made a loss of half a billion rand since its 2006 launch, due to undercutting the viability of the private low cost carriers.

He added that this again brings to question the role of Mango in the South African market, its failure to disclose its financial statements - as required of all State Owned Enterprises by the Public Finances Management Act - and government’s breach of its own Aviation Transport Policy, in which it committed to a level playing field in the domestic aviation sector."
Source [Comair Ltd]

In response to the allegation today, Gigaba today shot back:
"The allegations made by Mr Venter, CEO of Comair Ltd, including citing Mango as the cause of 1Time’s demise with over 1000 employees as collateral damage, are serious in nature and designed to cause commercial harm to Mango as an entity, and by default the State, with an apparent expectation of impunity to recourse. "
Source [Moneyweb]

Venter today, took aim at the legalities of Mango's accounting practices stating that Comair, as a listed company on the JSE, releases detailed financial results every six months in accordance with the Companies Act, the rules of the JSE and based on International Financial Reporting Standards:
Comair has an obligation to reveal its results as a listed company. kulula.com is merely a brand of Comair Limited – it is not a separate company from Comair. Although Mango is a subsidiary of SAA, it is a separate company and needs to report as such.
Mango is legally obliged, as a National Public Entity listed under Schedule 2 of the Public Finance Management Act (PMFA), to publish its financials and submit these to government and the general public.
This points to a bigger question - who is taking responsibility to ensure that SAA, SAX and Mango comply with their legal requirements in terms of the Public Finance Management Act?” says Venter. 
Source [Comair Ltd]

Minister Gigaba went on to make Mango’s current, calendar-year-to-date cash flow statement (movement) available here. In it Mango is said to be "in a cash positive, neutral movement position, ergo, that the airline is a model of stability within a sector plagued by continuous economic challenges in a contracting market.”

Gigaba ended his statement by taking a shot at Comair and their past grievances against 1Time stating:
Comair chooses, at a time of material global and local Industry crisis and, more specifically, a time of human hardship for 1Time employees, to assert underhanded practices on the part of Mango, when in fact:
  • Comair competed with 1Time on every one of the 1Time’s eight Domestic routes, whereas Mango competed on three routes only;
  • The only Competition Commission complaint lodged by 1Time during its existence was aimed at Kulula, relating to alleged exclusionary practices pertaining to the Lanseria airport;
  • A cursory search of public-domain coverage (Google), pre-dating Mango’s  launch (2004 – 2007), indicate the extent of animosity and rivalry that existed from Comair towards 1Time, given that the founders of 1Time were ex-Comair executives;
  • The extent to which 1Time suffered losses after eventually being allowed to enter the Lanseria-Durban and Lanseria-Cape Town routes, where Kulula holds a dominant position with more than 65% of departures.

Stay tuned for more rough and tumble tough talk.