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Mango Airlines faces obstacles in its business rescue process

Hope is fading fast for Mango Airlines as the government stalls business rescue proceedings. Will this be the end of yet another South African carrier?

Recent years have seen the demise of two high profile South African airlines. SA Express ceased operations in March 2020, and Comair followed suit in Jun 2022. SAA had a near death experience at the beginning of the pandemic only to rise phoenix-like from business rescue with a trimmed down offering and new zest for life.

At this stage it’s difficult to tell which of these ranks Mango will join. In December 2022, Mango’s BRP expressed confidence in the airline’s ability to resume operations soon. However, a sudden turn of events has arisen to hamper this positive outlook.

In it’s fourteenth update, Mango’s BRP has mentioned the possibility that the airline might have to abandon hopes of business rescue and start winding down its operations in the months to come.

Government hampers Mango Airlines return to the skies

As the major shareholder in Mango airlines, the South African government has the ultimate say in the carrier’s destiny, and things aren’t looking good in this regard.

Mango airlines entered voluntary business rescue in July 2021, and Sipho Sono, a senior business rescue practitioner, was appointed just a month later. His primary mandate was to find investors willing to rejuvenate the company.

At the same time, the BRP received R819 million to formulate and carry out a rescue strategy for the airline.

The major objectives of the plan were to reduce operational costs by cutting down on employees and trimming processes. Part of the plan was for the government to dispose of its shareholding in order to sell Mango to private investors.

Subsequently, all the carrier’s staff where retrenched, resigned, or received severance packages at the outset of this process.

In an update published in November, the BRP claimed that issues surrounding the sale of the government’s shares had been ironed out, presenting a positive outlook for the airline.
However, according to a mid-January update, the BRP is yet to receive a decision about disposing of SA-Airlines shares in the budget carrier.

What’s the hold up?

According to Sono, the Minister of Public Enterprises, Pravin Gordhan, wrote to SAA on 20 December 2022, expressing concerns over queries raised by SAA. Effectively, this means he has withheld his approval of the sale within the 30-day timeline, thus stalling the business rescue process.

Furthermore, SAA is still awaiting a letter from the National Treasury communicating that the BRP must resubmit their application directly to the National Treasury. Until that happens their submission is considered incomplete.

Bizarrely, the BRP wasn’t provided with copies of these letters but instead received a summary of the DEPE and National Treasury’s concerns upon enquiring during January 2023.

Currently the BRP is considering this summary to determine whether they can resolve the concerns raised. When they’ve completed this process, they can reply to the affected parties.

Additionally, Mango remained grounded beyond the 12-month grace period granted by the Air Services Licensing Council, meaning its licence was suspended in August 2022, which makes it a less attractive prospect for buyers.

There’s a possibility that Mango may lose its potential investors as a result of these complications. If this happens, Sono will have no choice but to wind down the carrier’s operations.

The way forward

Until the BRP can satisfy the concerns raised by SAA, there can be no progress on the sale of Mango. Without investors, the airline cannot meet its outstanding debt obligations, and will have to be liquidated.

While Sono firmly believes its worth saving Mango Airlines and also entirely possible to do so, everything hinges on these last few significant stumbling blocks.

If he fails in his quest, it will mean the end of this vibrant budget carrier. FlySafair and Airlink have done an admirable job to provide South African travellers with affordable tickets on other SA Airlines, so the loss of yet another budget carrier shouldn’t have a major impact on the current availability of flights.

SA Airlines
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