SA court places Mango in immediate bankruptcy protection

The South African High Court in Johannesburg has issued an urgent order placing state-owned low-cost carrier Mango Airlines (JE, Johannesburg O.R. Tambo) into business rescue (a local form of bankruptcy protection) effective from July 28, 2021.

The order handed down electronically on August 10, 2021, by Justice Michael Antonie followed an application by the Mango Pilots Association, the South African Cabin Crew Association (SACCA), and the National Union of Metalworkers South Africa (NUMSA) – heard during virtual court proceedings on August 6 – to have the cash-stricken airline placed in business rescue. Labour’s application was opposed by Mango, whose board wanted to appoint its own administrator in the business rescue process, and South Africa’s Companies and Intellectual Properties Commission (CIPC).

As previously reported, the labour unions had argued that the Mango board’s resolution on April 16, 2021, to place the airline into business rescue had been invalid because the South African Companies Act stipulates that a Board resolution to file for bankruptcy protection must be filed within five days with the CIPC in order to take effect. However, the board’s resolution was only approved by the government on July 22, 2021, where-after it unsuccessfully tried to file the resolution with the CIPC on July 28, a day after the trade unions had filed to put the airline in business rescue.

Delivering his decision, Justice Antonie said it was clear that both parties agreed that the airline should urgently be placed in administration and most, if not all affected persons agreed the airline should be placed under supervision.

The judge, therefore, dismissed labour’s application. He declared as “invalid” the CIPC’s refusal to process the Mango board’s resolution adopted on April 16, 2021, under Section 129 of the Companies Act and to make a change to Mango’s enterprise status to “in business rescue” once the resolution was filed. He ruled that Mango’s business rescue proceedings had become effective from July 28, 2021 (when the resolution was filed with the CIPC) and directed the Commission to immediately change Mango’s status to “in business rescue”. As agreed by the CIPC, Mango had five business days from the date of the order (until August 15) or the finalisation of any appeal to file its business rescue application with the Commission, the judge ruled, adding he would furnish full reasons for his decision at a later date.

The court’s decision was welcomed by the airline’s shareholder representative, the Department of Public Enterprises, underlining that it supported the decisions made by both boards of Mango, and parent South African Airways (SA, Johannesburg O.R. Tambo). “The decision is good news for stakeholders in the aviation industry as it brings certainty to the process that will unfold to restructure Mango end ensure we have a sustainable aviation asset that will service the low-cost market in the country,” DPE said in a statement. The department added that the restructuring of SAA’s subsidiaries, Mango, SAA Technical and Airchefs would ensure that the SAA Group would be “fit for purpose” in future.

NUMSA spokesperson Phakamile Hlubi-Majola declined to comment.