Mango Airlines (JE, Johannesburg O.R. Tambo) may eventually receive financial relief with the South African Parliament later this week expected to process a bill that will release ZAR819 million rands (USD59.5 million) in state funds to the cash-strapped budget carrier.

This was disclosed by Public Enterprises Minister Pravin Gordhan during an online briefing to the Parliamentary Portfolio Committee on Public Enterprises on June 2, 2021.

As South African Airways' subsidiaries were not in business rescue, funding for their recapitalisation was not included in the parent company's business rescue plan, leaving them in dire financial straits.

With Treasury resisting further state bail-outs given other national economic priorities, Gordhan intends to divert ZAR2.7 billion (USD196 million) of the ZAR10.5 billion (USD764.6 million) allocated for SAA's business rescue to its subsidiaries, including Mango, SAA Technical, and Air Chefs.

The issue has become a sticking point being disputed in terms of South Africa’s Companies Act by lobby group OUTA, with the shareholder arguing the amount was always included in the approved budget for SAA. As previously reported, SAA Technical (SAAT) will receive ZAR1.6 billion (USD116.5 million), Mango ZAR819 million, and Air Chefs ZAR218 million (USD15.8 million).

Mango has been limping along with most of its aircraft grounded due to technical issues and the inability to pay critical vendors, meaning the airline is at constant risk of being grounded due to deferred payments, Department of Public Enterprises (DPE) Acting Deputy Director-General, Melanchton Makobe, told the parliamentary committee. Most of Mango’s flights remain cancelled with only a limited number bookable for the next two days, its flight schedule reveals. This follows after no flights were available beyond June 1, 2021, a few days ago.

Makobe said financial problems at SAA Technical, which maintains Mango’s aircraft, snowballed into most of Mango’s aircraft having technical problems. Its market share has declined to 14% since February 2020. With less income and greater cash outflows, some payments have been deferred in order to meet critical ones. The required funding would mainly go towards paying off accumulated debt instead of positioning the airline for the future, he said.

Gordhan indicated that lease obligations on Mango’s fleet of thirteen B737-800s leased from Carlyle Aviation Partners, GECAS, and Macquarie AirFinance respectively, were crippling the airline. “Deals entered into by the previous management with lessors are a cause of serious concern to us. There was almost an exploitative relationship between - what we have now discovered - the lessors and Mango, which is going to cost the Mango situation quite heavily.” He also expressed concern about the airline’s shortage of cash and increased competition in the domestic market. “Mango is in financial difficulties and there are decisions to be made in the short-term in that regard,” he said.

DPE was recommending that funding for Mango be re-assessed based on changed market circumstances, future plans of SAA and its subsidiary, and available funding.

Meanwhile, SAA Technical, which had lost about 70-80% of its business during South Africa’s hard lockdown in 2020 in terms of international incoming and domestic business, still had “a lot of potential for the future”, but needed to be restructured "in order to get the balance right between income and costs", Gordhan said.