Real reason SAA wants Mango to flop

An association representing pilots of low-cost airline Mango believes its sole shareholder, the South African Airways (SAA) Group, wants its business rescue to fail so that the national carrier’s private deal with Lift’s owner can go through.

Mango’s business rescue practitioner (BRP), Sipho Sono, published his now-defunct plan to save Mango in early November 2021.

Under this plan, Mango would resume a limited number of flights in December to make it more attractive to a potential private buyer.

Sono said he believed there was a decent chance of success for Mango if critical working capital arrived in time.

That capital includes R719 million of R819 million that SAA still owed to Mango as part of a parliament-approved package for the business rescue of the broader SAA group.

However, SAA thwarted Sono’s plan and claimed that it would not be feasible for Mango to resume flights before a private buyer is secured.

It also did not want any money to go towards restarting the airline but instead insisted Mango should use it for restructuring only.

Thomas Kgokolo
Thomas Kgokolo, SAA acting CEO

Sono, however, said before the plan’s publication, he consistently communicated in letters to SAA and the department of public enterprises that the money would go towards resuming operations.

“It has always been my understanding and intention that the purpose for the utilization of the R819 million would include Mango resuming operations,” said Sono in a letter in response to SAA’s stance.

“This has been consistently communicated to SAA and the Department of Public Enterprises,” he stated.

“We communicated that SAA as the sole shareholder of Mango was not in a position to provide nor to motivate to SAA’s shareholder for any capital injection required to return Mango to commercial operations.”

“A letter from SAA to the DPE on October 26 also suggests that SAA, at least on the date of the letter, also understood the funds would be used to fund restructuring and working capital.”

Sono said that every day that Mango was not flying was eroding its customer base.

“The longer the airline is mothballed, the more costly a restart will be with larger associated risks,” he stated.

Sono subsequently published a revised business plan that accommodates SAA’s view. SAA’s creditors approved the new plan during a meeting in early December 2021. Mango now hopes to find a private buyer before the end of March 2022.

Mango plane

However, Mango Pilots’ Association (MPA) spokesperson Jordan Burlet said SAA’s decision to refuse the initial plan was “devastating”.

“The originally published plan would see 300 [out of 708] people retrenched,” Butler said.

“With the proposed amendment, all employees stand to be retrenched. This excludes all the possible knock-on retrenchments down the Mango value chain.”

Sono said in his revised business plan that 553 Mango employees, or 78% of its total compliment, had applied for voluntary severance packages (VSPs) offered as part of the airline’s business rescue.

Butler said the local prospects of work for these staff members were very slim.

He highlighted that SAA had already retrenched 3,800 staff during its restructuring process.

“The shareholder seems to be doing everything in its power not to create jobs in the sector,” he stated.

Comair, which operates Kulula, had also reduced staff members during its business rescue process.

Mango Airlines

Butler said SAA’s decision to refuse Mango’s resumption of services until a private investor was secured made no sense.

“They are effectively paying more than R100 million extra in retrenchments and destroying the value Mango would achieve in a sale by a further estimated R150 million,” Butler said.

Butler said he suspected that Mango posed a threat to SAA and its planned Takatso deal.

The Takatso Consortium includes Global Airways, which owns South Africa’s newest low-cost carrier, Lift, a direct competitor of Mango.

“All three, SAA, Mango, and Lift, cannot exist in the same arena,” he stated.

With Mango out of the picture, any possible competition issues raised by the Competition Commission would be off the table.

Butler said that before the change of plan, Mango had two potential SEPs (strategic equity partners) who showed interest in the company.

“We will have to engage further to ascertain whether or not it is still a viable deal for them,” he said.

SAA referred MyBroadband to an earlier statement responding to the original business rescue plan when asked for comment.

It did not respond to questions regarding why Mango was not allowed to use any money for resuming operations when SAA used R500 million of its bailout to restart operations in September 2021.

It also did not answer questions about whether it was purposefully torpedoing Mango for the sake of its new agreement with Takatso.

Lift told MyBroadband it was a private business run “completely separately” and was not part of the Takatso consortium.

The consortium did not provide feedback to our questions by the time of publication.

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Real reason SAA wants Mango to flop