Mango Airlines (JE, Johannesburg O.R. Tambo) – the state-owned low-cost subsidiary of South African Airways (SA, Johannesburg O.R. Tambo) - will enter into bankruptcy protection following a decision by its board and shareholders, according to SAA chief executive Thomas Kgokolo.

He told South Africa's ENCA TV on July 26: "We are aware that there are delayed salaries, and we can say that the board and shareholders have agreed that Mango will go into business rescue. We are currently consulting with labour and all key stakeholders in terms of how we can manage that particular process.”

Kgokolo said he would have more clarity by the end of the week or early next week about when the ZAR2.7 billion rands (USD180 million) in government support would be allocated to the subsidiaries. The money was diverted from ZAR10.5 billion (USD702.5 million) for the business rescue of SAA in terms of a Special Appropriations Act passed in June. It provides for ZAR819 million rands (USD57.3 million) of state aid to be allocated to Mango.

The announcement by the SAA CEO appeared to have taken Mango by surprise with spokesperson Benediction Zubane on Monday morning unable to confirm the news.

Trade unions representing Mango employees on Monday morning said they would file an urgent application in the South Gauteng High Court in Johannesburg later in the day to place the airline in business rescue, which was expected to be heard on August 3, 2021.

They said this followed a liquidation application already filed on April 19, 2021, by one of Mango’s creditors, Aergen (Aergen Four Aircraft and Aergen Five Aircraft LTD). The lessor had agreed to defer the liquidation hearing to August to allow Mango time to commence business rescue proceedings, according to an affidavit by the South African Cabin Crew Association (SACCA), the Mango Pilots Association (MPA), and the National Union of Metalworkers South Africa (NUMSA).

According to supporting documents, Mango by April 2021 was ZAR2.5 billion (USD168.4 million) in debt, including ZAR174 million (USD11.7 million) in forward sales liability. Amounts owed to lessors and other major creditors were as follows:

  • ZAR365.5 million (USD24.6 million) owed to Macquarie AirFinance;
  • ZAR136.6 million (USD9.2 million) owed to START Ireland Leasing Ltd;
  • ZAR120 million (USD8 million) owed to Celestial Aviation Trading c/o CE Capital Aviation;
  • ZAR93.9 million (USD6.3 million) owed to Aergen Aircraft Five Ltd;
  • ZAR372.8 million (USD25.1 million) owed to Lufthansa Technik;
  • ZAR1.7 million (USD114,000) owed to Engine Lease Finance Corporation;
  • ZAR718 million (USD48.3 million) to SAA Technical; and
  • ZAR70,042 (USD4,720) to SAA.

ZAR154 million (USD10.3 million) was needed to recapitalise Mango including ZAR66 million (USD4.4 million) to return six aircraft to service; ZAR53 million (USD3.5 million) for labour; and ZAR35 million (USD2.3 million) for Information Technology.

By July 2021, Mango owed its 750 employees ZAR157 million (USD10.5 million) in unpaid salaries.

In a joint statement, the unions said Mango employees were in a “desperate situation”, having worked without pay for two months and on average being owed six months’ worth of pay due to partial payments. “The airline has not been capitalised by the (shareholder representative) Department of Public Enterprises (DPE), despite promises having been made by government and the shareholder, that once the Appropriations Bill is passed, Mango and other SAA subsidiaries will receive operating capital."

They said numerous letters to the boards of Mango and SAA and Public Enterprises Minister Pravin Gordhan had been unanswered, resulting in the unions on July 7 having requested President Cyril Ramaphosa to intervene and to hold Gordhan accountable “for his department’s total disregard and dereliction of duty at Mango Airlines and its employees”.

Concerning SAA, Kgokolo said the airline expected to have its Air Operator’s Certificate (AOC) restored by Friday (July 30) which meant it would be able to restart operations. He said the carrier would phase in its restart, beginning with cargo operations in August.

The restart of passenger operations would be discussed with key shareholders this week. An announcement would be made either later this week or early next week in this regard. He said the airline had been closely monitoring prevailing COVID-19 travel restrictions, which were relaxed by Ramaphosa on Sunday night (July 25) from Alert Level Four to Alert Level Three, which included the reinstatement of leisure travel to/from Gauteng Province that includes South Africa’s biggest city Johannesburg and the capital Pretoria.

Kgokolo said SAA would be using eight aircraft to restart its operations, but gave no further details. “There are two that are arriving mid-August, so we (will) have aircraft to fly,” he said.

Meanwhile, he said, labour relations concerning Section 189 retrenchments and the restructuring of SAA’s maintenance company, SAA Technical, and catering subsidiary, Air Chefs, would be finalised in August. He declined to disclose how many people would be dismissed, saying this was part of the discussion with labour. Despite the retrenchments at both subsidiaries, care would be taken to retain essential skills so that both subsidiaries could effectively service SAA once it restarts, albeit on a much smaller scale than before.

He said SAA would be careful to operate only sustainable routes in future and to limit its costs. “The next three months will be key in terms of make it or break it in terms of us being able to remodel the business, and being able to relaunch a business that can sustain itself.”

He said the airline had submitted all required compliance documentation to the South African Civil Aviation Authority regarding re-certification. The last labour relations deadlock with SAA pilots, which for months had been locked out of SAA premises – had been resolved two weeks ago and they had completed their mandatory re-training on Saturday, July 24.

SAA exited business rescue in April after it had entered administration in December 2019. All its operations were mothballed in September 2020, including the cancellation of all its aircraft leases.

In June this year, the government announced it had selected the majority black-owned Takatso Consortium as its 51% strategic equity partner, with a public listing of the company slated for the long-term, with the government eventually retaining a 33% “golden share”. Takatso consists of Johannesburg-based ACMI specialist Global Aviation Operations (GE, Johannesburg O.R. Tambo) (which also owns domestic start-up Lift Airlines (GE, Johannesburg O.R. Tambo)) and state-funded Harith General Partners asset fund managers. "The due diligence process, for SAA’s Strategic Equity Partner, runs concurrently with SAA’s process of taking to the skies again, as we are working on a business model that seeks to grow the airline and the economy," the airline said in a statement issued later in the day.

Editorial Comment: Added trade union statement and court affidavit details. Updated with SAA statement issued later. - 26.07.2021 - 17:04 UTC