The business rescue plan for Mango Airlines accepted by 84% of creditors on Thursday makes for fascinating reading. It owes a lot of money to other state-owned enterprises (SOEs) and organs of state.
Much of this is as a consequence of government never resolving the fact that it was operating three separate state-owned airlines – South African Airways (SAA), Mango and SA Express. This has created a situation where Mango now owes over R1 billion to SAA and SAA Technical, which have just emerged from business rescue.
In effect, much of government’s funding allocated to the airline under parent SAA’s business rescue process will now be used to implement Mango’s business rescue plan (in other words, not for working capital or to restart operations).
SAA will make an equity injection of R719 million and thereafter relinquish its shareholding to government as the board of SAA “endorsed management’s assessment that Mango Airlines does not fit into the future business strategy of SAA”. The Takatso Consortium has confirmed it also has no interest in Mango.
In total, Mango owes R2.8 billion to creditors.
Of this, R2.5 billion is owed to so-called “concurrent” creditors (who hold no security over the amounts owed to them).
The airline owes the South African Revenue Service (Sars) a total of R97.4 million, primarily in unpaid pay-as-you-earn or PAYE tax (R34.6 million), customs (R47.6 million) and Vat (R11.4 million). The plan says the “Sars claim will be compromised through settlement/expunged”.
Mango owes a further R159 million to its employees in salaries and leave pay. The business rescue plan says the airline has 708 employees, and that because the company “will not be resuming operations”, it is necessary for it to “rationalise its workforce”. It has initiated a voluntary severance programme. The business plan cautions that if the uptake of this is low the airline “may have to retrench some if not all of its workforce”.
Since being placed in business rescue, employees have been paid their full salaries for July, August and September. In October, employees received 50% of their salaries and “the balance (R12.8 million) will be paid soon after receipt of further funding expected from the shareholder”. It is intended that employees will receive their unpaid remuneration and severance packages in full.
A remarkable 52% of the total amount owed to concurrent creditors (R2.6 billion) is due to SOEs or organs of state. Notable or sizeable concurrent creditors are included below.
|SAA Technical||R802.2 million|
|South African Airways||R315 million|
|Airports Company of South Africa||R170.4 million|
|Air Traffic Navigation Services||R63 million|
|South African Civil Aviation Authority||R16.9 million|
|Auditor General of South Africa||R1.1 million|
|South African Weather Service||R940 000|
|Macquarie Aircraft Leasing Services (Ireland)||R292.3 million|
|Start Ireland Leasing||R140.8 million|
|GE Capital Aviation (Celestial Aviation Trading 41 Ltd)||R134 million|
|Aergen Aircraft Five Limited||R84.6 million|
|Lufthansa Technik AG||
|Aviation Co-ordination Services||R23.3 million|
|Bidair Services||R5 million|
|Comair Limited||R1.4 million|
|Engine Lease Finance Corporation||R1.5 million|
|Israel Aerospace Industries||R3.6 million|
|Lanseria International Airport||R14.3 million|
|Menzies Aviation||R16.4 million|
|Travelport International||R1.5 million|
* Amount per claim of creditor (if not available, the balance as per company records)
Lessors are owed a total of R652 million, or 25% of total concurrent claims.
Mango owes a further R299 million, or 12% of the total, to Lufthansa Technik which would’ve provided aircraft maintenance services to the airline as SAA Technical increasingly became unable to do so.
Service providers such as Bidair (R5 million) and Menzies Aviation (R16.4 million) are owed far smaller amounts, as is Lanseria International Airport (R14 million). The grounded “mothballed” airline even owes R1.87 million to Google.
Concurrent creditors can expect a payment of 4.43c in the rand under the current plan.
This means that, for example, SAA and SAA Technical will receive a payment of R49 million of the R1.1 billion owed. An additional R9.7 million – and counting – in post-commencement claims will be settled in full (this excludes the salaries that will be paid separately).
It is understood that the process to find a strategic equity partner will start in the “coming days”.
Mango also has an unflown ticket liability of R183 million, which will be settled through the issuing of vouchers to passengers for use once the airline commences operations.
Would-be travellers need likely not hold their breath.