Aviation is one of the most sensitive industries to fluctuations in the price of crude oil, and will be hit hard domestically this year as a $100 a barrel market becomes a reality. So says Mango CEO Nico Bezuidenhout who, despite this, maintains a bullish outlook for his airline in 2008 noting that Mango’s low cost base makes it easier for the airline to manage high fuel prices.

"Jet fuel prices rose by an average of 58 percent last year," says Bezuidenhout, "and all market participants are affected. Fuel prices typically represent up to ⅓ of an airline’s operating costs and, without the benefit of an overall strong business plan and lower non-fuel operating costs, some airlines may struggle to compete this year." He says that competitors with older, less fuel efficient aircraft will feel the pinch sooner.

A typical aviation response to surging fuel prices is to introduce fuel levies or higher prices in order to recover these costs.

"Mango will not introduce a fuel levy," says Bezuidenhout. "Instead, our business will focus on managing our already low cost base more effectively. Should the cost of fuel necessitate a fare increase, I am also confident that Mango will ably remain more affordable than our competitors as our business model and new generation fleet of fuel-efficient Boeing 737-800 aircraft allow for more cost efficiency — which we will pass onto the consumer."

He also notes that Mango will continue to quote fares inclusive of all taxes — as "we are not interested in pulling the wool over consumer’s eyes."

In mitigation of soaring fuel costs, Bezuidenhout says that there are several measures airlines can take in order to remain affordable to consumers without introducing a fuel levy: "Hedging will only deliver temporary relief as ultimately market forces will still influence this medium term measure," he says.

Mango already operates aircraft with optimised seating configuration which reduces the overall cost per seat on any sector flown and switching to more modern and fuel efficient aircraft such as the airline’s young fleet — also delivers significant savings.

But, says Bezuidenhout, real cost control in mitigation of higher fuel prices should come from within the business’ operating process: "The reduction of non-fuel costs is probably the single most controllable aspect of the equation. This is what we have based our business model on from the first day of operation — ensuring that the overall cost of sale is significantly lower than that of our competitors."

Bezuidenhout expects industry growth to slow down in 2008, but he does not foresee a plateau in Mango’s growth: "As our competitors become more expensive, Mango will remain the most affordable airline in domestic aviation. At the very least, we already save by only paying the salary of one CEO."