Future of South Africa’s Mango hangs in balance
The future of stricken state-owned Mango Airlines (JE, Johannesburg O.R. Tambo) will be decided at a creditors’ meeting on Monday (November 15), with parent South African Airways (SA, Johannesburg O.R. Tambo) advising there is no working capital to fund a proposed resumption of flights in December.
In voluntary business rescue since July 28, Mango still awaits an allocation of ZAR719 million rand (USD47 million) from a state-bailout of ZAR10.5 billion (USD688 million) granted to SAA. “The process is underway, and we should know before the end of the month,” Mango’s spokesperson Benediction Zubane told ch-aviation.
Mango’s administrator, Sipho Sono, wants Mango to resume operations in December to safeguard its route rights and take advantage of high season demand. However, he has received only ZAR100 million rand (USD6.5 million) of the state allocation, mainly used to fund the salaries of Mango’s 708 employees. As reported previously, both Sono and SAA last month made written requests for the money from the government’s shareholder representative Department of Public Enterprises (DPE). Sono earlier said he expected the balance to be paid out immediately upon adoption of Mango’s business rescue plan, to be voted on at the November 15 meeting.
However, in a cryptic statement on November 11, the SAA Board advised Mango’s administrator that resuming operations in December would “place the airline in further financial difficulty as there is no working capital to fund Mango’s business operations”.
It advised the subsidiary should “rather use available funds to restructure” and urgently find a strategic equity partner (SEP) that would fund its future operations. SAA interim chairman John Lamola said: “We believe that finding a SEP for the low-cost carrier would be a sustainable solution”.
SAA spokeswoman Vimla Maistry was unable to clarify the Board’s reference to “no working capital”. At the same time, DPE spokesperson Richard Mantu could not confirm when the ZAR719 million (USD47.6 million) balance would be paid out.
SAA has made it clear that Mango does not form part of its own restructuring and that it will not receive any more state funds other than those already allocated. Still, Sono has stated he “continues to believe there remains a reasonable prospect” for Mango to be rescued.
His plan, published on October 29, sees SAA selling off its 100% subsidiary to a private investor, despite the airline’s only material asset being a spare engine with a current book value of ZAR97 million (USD6.3 million). Its debt amounts to more than ZAR2.8 billion (USD182.7 million) with ZAR183 million (USD11.9 million) in forward sales and un-flown ticket liability.