It has been more than two months since Mango found itself having to adopt a week-by-week approach to its flight operations as it waits for funding. The deteriorating financial situation has brought the airline to the point where it now cannot pay its staff salaries for the month of June. And at the time of going to press, the carrier displays flight schedules only for the following 24 hours.
At the end of April, Mango acting ceo, William Ndlovu, released a statement providing some insight into the state of affairs at the airline. He explained that the airline had been repeatedly promised funding from the government but that this had not been received.
Aircraft lessors then gave the airline an ultimatum to pay up or be forced to ground their aircraft. Mango then scaled back operations. But shortly after, the airline was grounded by Acsa because of unpaid bills. However, after a series of closed-door meetings, Mango continued to fly, but on a week-by-week basis.
It then came to light that the government intended to give Mango a bail-out, to the tune of R819m, through the drafting of a Special Appropriations Bill that would allow the appropriation of R2,7bn of SAA’s business rescue funds and the redirecting of them to SAA subsidiaries, including Mango.
Despite public objections by the DA, the Organisation for Undoing Tax Abuse (Outa) and business rescue experts about the legality of appropriating money from an approved business rescue plan and funnelling it to another purpose, it has already passed through the National Assembly and the National Council of Provinces (NCOP) and now sits at the President’s desk awaiting his signature.
During the briefing to the NCOP, the DPE’s acting deputy director-general: aviation, Nonny Mashika, said: “South African Airways went into business rescue on December 5, 2019 due to continuous losses over an extended period. South African Airways exited the business rescue process on 30 April 2021, and its subsidiaries were not put into business rescue. The impact of South African Airways being in business rescue exacerbated financial challenges of the subsidiaries. The business rescue plan recognised the deteriorating financial situation of South African Airways. Clause 14.6 of the business rescue plan recognised the relationship between South African Airways and its subsidiaries, and the requirement for intra-group transactions. The success of the business rescue plan is dependent on financial viability of subsidiaries. The funding for South African Airways subsidiaries was approved by government. A total of R2,7bn was part of the request. The R3,5bn which is needed over three years needs to be approved. Urgent funding of R10,5bn was allocated up until 31 January 2021. It consists of R2,8bn allocated for employee-related payments, R800 million for creditors after the business rescue process, R2bn for working capital, and interim flying, R2,7bn for the recapitalisation of subsidiary companies, and R2,2bn for the honouring of ‘unflown’ liability. Regarding the remainder of the three years, R1,2bn was allocated for ‘unflown’ liability and R2,3bn for dividend concurrent creditors. The total funding amounts to R14bn.”
However, the DA, Outa and business rescue experts continue to claim that the Bill is unlawful and, moreover, that the funding, which will be given without any restructure of the unprofitable airline, will be a waste, as it will not be sufficient to cover the debts of Mango or place the airline in a position where it can operate profitably.
“Last year I had sight of internal Mango reports that indicated that the airline was more than R3bn in debt. This was before the impact of COVID-19 on the airline. R819m will not go far to alleviate the SOE’s financial issues,” commented DA Scopa member, Alf Lees.
In an article published by The Citizen last week and penned by Mango’s previous head of corporate affairs, Hein Kaiser, it was also revealed that Mango staff had not been paid for the month of June. The contents of a leaked internal letter from William Ndlovu to Mango staff were also published, where the acting ceo was alleged to have said that payments were uncertain but he hoped that there would be money available before month end. He also revealed in the mail that Mango’s fleet now comprised only two aircraft (of its original 14), and that there were no funds to cover salaries from revenues earned.
“Just like in May, we have applied to SAA for assistance. At this point we are not sure when our application will be approved by both SAA and the DPE and the funds disbursed to Mango,” said the letter.
A further concern for agents and Mango passengers, is that Mango’s flights are only loaded in the system for another 24 hours until the end of June. No flights appear from July 1 onwards.
A tour operator, who wished to remain anonymous, said they had received no further updates from Mango on the situation and that, as far as they understood, the staff too had been left in the dark. “The government gives them permission to load flights a few days at a time and they cannot plan beyond this. This is a crazy way to run an airline, which works on the premise of opening up sales well ahead of flights to fill up planes,” said the operator.
Mango HOD: marketing and communications, Benediction Zubane, told Travel News that he could not comment about the claims that salaries had not been paid but said Mango expected to update stakeholders “shortly” on the continuation of its flights.
This is a developing story. Travel News will provide further updates as more information comes to light.
