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Down to two planes, Mango should’ve been in business rescue with SAA

After route and flight cuts, the airline is barely operating at all.
While SAA’s historical debt and other problems have largely been dealt with, the issues in its subsidiaries have been allowed to fester. Image: Moneyweb

Embattled state-owned low-cost airline Mango is currently operating only two aircraft. It’s using these for return flights on three routes daily, in other words for six flights a day. These flights are between Johannesburg, Cape Town and Durban. While Port Elizabeth, East London, Bloemfontein and Zanzibar exist as options on its website, there are no scheduled flights to these destinations.

Therefore, news that the board and shareholders have agreed to place the airline into business rescue should not come as a surprise. What is surprising is that the three labour unions at Mango forced the government’s hand by filing papers at the South Gauteng High Court. Numsa and Sacca (South Africa Cabin Crew Association) confirmed this to Moneyweb’s Fifi Peters on Monday evening.

Read: Mango Airlines to enter business rescue, says SAA interim CEO

At the end of June, government approved the release of funds for three South African Airways (SAA) subsidiaries. Of the R2.7 billion ‘diverted’ from the R10.5 billion allocation of funds for SAA, Mango was to receive R819 million. It is unclear whether these funds have flowed to Mango or not.

Mango says “operations are not affected by this decision and further updates will be made available as soon as possible”. It has referred queries to SAA and the Department of Public Enterprises (DPE).

It is likely that the injection of the R819 million in funding and a formal business rescue process which affords the airline protection from creditors are linked.

Mango has had a tumultuous few months, with leaked letters, confirmation that staff were not being paid full salaries and grave uncertainty as to whether the airline would even be able to trade beyond May 1.

On April 28, flights simply did not take off. Later that day, it emerged that Acsa (Airports Company South Africa) had barred the airline from taking off as it had not kept up with a payment plan to settle outstanding debts. Flights resumed late that evening, following meetings between the DPE, Acsa and the airline.

Read: How not to run an airline

Mango’s decline over the past two years has been downright astonishing.

When SAA effectively withdrew from the domestic market, save for a few return flights to Cape Town, it handed all that demand to Mango.

Since then, the airline has cut routes and flights to the point where it is now barely operating at all.

By May it was operating three daily return flights (from Johannesburg) to Cape Town and two to Durban with roughly daily service to Port Elizabeth and five flights each week to George. It assured travellers that it would resume the service to Zanzibar “soon”. That was three months ago.

Dwindling fleet

In May, the airline said it was operating three of its fleet of aircraft. Of the rest of its fleet, it said that four aircraft were in storage maintenance, five were undergoing “heavy check maintenance” and two had been returned to their lessors.

The challenges with having its aircraft maintained by SAA Technical (SAAT) are well-documented. It has been unable to procure spares in advance and relies on prepayment or partial prepayment of work in order to buy spares. But Mango itself has faced severe liquidity constraints, and has hardly been in any position to pre-fund maintenance.

There has been ample speculation that some of Mango’s leased aircraft in ‘storage’ are not in a position to fly before outstanding maintenance is completed. It is effectively flying with the only planes that are able to operate.

Drastic market share loss

A presentation to the portfolio committee on public enterprises in June revealed how drastic Mango’s market share loss has been.

In January 2020 (before Covid-19), airlines ranked by domestic market shares were as follows: Kulula.com (35%), Flysafair (23%), Mango (22%), SAA (13%), British Airways (5%) and Airlink (2%).

By April 2021, this picture looked starkly different, with Kulula.com and Flysafair both at 32%, Mango at 14%, Airlink at 11%, BA at 7% and new entrant Lift at 4%.

With its recent operational challenges and a flight schedule that has shrunk to just two aircraft, it is likely that Mango now holds less market share than BA.

Confounding

Quite why parent SAA was placed into business rescue and three operating subsidiaries, Mango, SAA Technical and Air Chefs, were ‘allowed’ to continue trading remains a mystery.

All four entities should’ve been dealt with collectively as, never mind the shareholding, there were and are many interdependencies (SAA Technical is owed money by SAA and Mango, for example, while the bulk of SAAT’s and Air Chefs’ revenue used to come from SAA).

Instead, we have a mess where SAA’s historical debt and issues have largely been dealt with, but the issues in the subsidiaries have been allowed to fester, with debts and liabilities in these ballooning over the past two years.

Mango itself is far worse off than it would’ve been had it entered a business rescue process at the same time.

What may be dawning on the DPE (and National Treasury) is that the R819 million due to Mango is simply not going to be enough to stabilise the airline and ensure it is able to operate sustainably.

Recall that last year, Mango itself said it needed recapitalisation of R1 billion (arguably too low, even then). According to Fin24, the court papers reveal Mango’s current debt is R2.5 billion, with R718 million owed to SAAT, R156 million owed to Acsa and R57 million to Air Traffic Navigation Services (these are all state-owned entities!).

It is still unclear how Mango and the state’s other aviation assets will be separated from the ‘new SAA’.

Thankfully the government’s long-running plan to ‘consolidate’ and ‘simplify’ its aviation assets was never completed. Were that the case, all these entities would’ve collapsed into the SAA business rescue mess.

Business rescue cannot come quickly enough for Mango if it is to have any chance of being around in a year.

Perhaps at the same time, government will resolve the shareholding structure of the airline (as well as SAAT).)

Listen to Fifi Peters’s interview with Numsa’s Phakamile Hlubi-Majola and Sacca’s Zazi Nsibanyoni-Mugambi (or read the transcript here):

COMMENTS   28

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Where is the money for current bookings going? To prop up SAA so that it can resume flights?

most probably as you said that is what is happening, to try and save saa’s image and get at least one of “the saved and back in bussiness” saa’s birds in the air at the cost of another entity in the group – after all what was the end goal or purpose of mango especially whilst it is a 100% subsidiary of saa

the ironical part is that for every minute that an aircraft is not in the air it is losing money due its high capital outlay to buy / rent and its high running cost (maintenance even it was not in use) – for as long as sa government is wasting the sa taxpayers money on this still born entity, their management won’t understand a business concept

Not a chance unfortunately. As long as we have a clueless Govt. delusionally believing that it knows what it’s doing, first Mango, then Naartjie, then Orange, then Lemon, then Grapefruit Airways will follow suit, as sure as Strawberry are fruit. Please protect us from the ANC.

All these business around iron birds and keeping them in the air is just too complicated for ‘some’. It is not clearly understood by them and should rather be left to others to manage.

TWO AIRCRAFTS!!. I’ve heard of lean operations before but this is on another level, I guess it should be called a skinny operation or an anorexic operation.

There can liek to be two aircrafts

There can liek to be two aircrafts

They read about lean and mean some where.

This was just a rues to get that last cookie in the jar.

🙂 That was funny.

Whats concerning is that we need R819 million needed for a 2 Plane Operation.

While you need like R10 Billion for a fleet under SAA… Unless SAA is also hiding material info from the public eye.

Pravin should disclose the finances to the Public and operation details.

Sounds very Dodgy

Pravin can’t read a financial statement – he only knows how to play The Victim.

He’s a master at getting people to work without pay – if he wasn’t a civil servant with all the perks they get, he would’ve been a master conman.

Not another R10bn for SAA; another R50 FIFTY bn, according to an aviation expert interviewed on Cape Talk today!

That’s in the hope of SAA flying cargo next month. Which simply points to the fact that no sane human will risk his life on that distasteful, unreliable and tax mongering airline!

Handover a viable country to a gang of AK47-wielding bandits and…. I’m just surprised it took 27 years before the wings fell off plunging South Africa into this fatal nosedive. Goodbye SOE’s, SAPS, SANDF, HEALTH, EDUCATION, LAND RIGHTS… and everything else.

Many kudos to the engineers and system designers of the previous government – your designs and systems lasted 25+ years of serious abuse and no/ very little maintenance before it caved in. You make us proud – ECSA should create a special roll of honour for you!

Oh you mean the ones that made a completely unsustainable state and had to give their kid’s future to the ANC on a plate? The ones that are doing so well and who are so happy with the position they built for themselves? International pariahs? A joke in their own country? What a success! What a future they built for themselves.

Oh you mean the ones that made a completely unsustainable state and had to give their kid’s future to the ANC on a plate? The ones that are doing so well and who are so happy with the position they built for themselves? International pariahs? A joke in their own country? What a success! What a future they built for themselves.

Comment removed

BLM and the left are now trying hard to get Biden to hand over America.

Loving this!! Another failed botched operation. After Bezuidenhout left, looting time!!! Bye Mango..lol

“Quite why parent SAA was placed into business rescue and three operating subsidiaries, Mango, SAA Technical and Air Chefs, were ‘allowed’ to continue trading remains a mystery.”

ANC politicians do not fly on budget airlines.

The mystery is solved.

Its…..broken….fancy that…the hopeless continent…again!

And SAAT has announced 25% salaries this month….so much for their restructuring plan.

One man, one vote, one navy, one boat.

Two planes, no trains, it just gives us pains

There should be no stranded passengers because nobody in his/her right mind would have bought tickets from these state run bottomless holes.

Banana Airlines run by PawPaws, a real fruity looty affair!

Meanwhile Safair is starting a new route between Cape Town and Bloemfontein… announced today.
But the cherry on the top is…. just IN TIME for all the Free State Springboks supporters to hit our mother city THIS Saturday in time to celebrate along with us CapeTownians, our red wine and much improved weather, when the Boks take the Irish Lions apart!

Safair tickets at rock bottom prices (on it’s fleet of more than two planes) as long as you Vrystaters bring along lots of biltong for us mother city dwellers.

Anglo American has more planes . Close this shambles down it’s not worth the paper or the chat ! Pathetic ….

Privatize all SOE’s, not between the inner circle’s friends and connection, but let pre-vetted (By an independent 3rd party) bidders step in and set up an auction for all the Government’s broken toys.

Privatization goes against the communist grain of those in power, but hey, the SARB is Privately Owned which is probably its saving grace in South Africa.

Just remember, SARB is not a SOE but a regulator / central bank.

End of comments.

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