Labour unions have accused the South African government of strong-arm tactics, claiming it is with-holding bridging finance to stricken Mango Airlines (JE, Johannesburg O.R. Tambo) unless the unions drop an application for the airline to be placed in bankruptcy protection.

The application by the South African Cabin Crew Association (SACCA), the Mango Pilots Association (MPA), and the National Union of Metalworkers South Africa (NUMSA), will be heard in the South Gauteng High Court in Johannesburg on Tuesday, August 3, 2021. The unions represent the majority of Mango’s 750 employees who have not been paid for at least two months, while the airline awaits ZAR819 million rands (USD56 million) in state aid that was due to be released to the carrier following the passing of a Special Appropriations Act more than a month ago.

In a joint statement, the three unions claimed the government had bridging finance available to pay salaries, but wanted the unions to withdraw their application before paying it out.

They also claimed that the shareholder representative, the Department of Public Enterprises (DPE), was unwilling to join them in the bankruptcy application, despite an official announcement earlier this week that there was stakeholder agreement that Mango should enter bankruptcy protection. “The shareholder is insistent that they be the sole applicant and appoint their own sole business rescue practitioner. One can only assume ulterior motives are at play given that there is no further direction given. Why do they not want to work with us?” asked SACCA president, Zazi Nsibanyoni-Mugambi.

DPE spokesperson Richard Mantu declined to comment on the unions' allegations.

NUMSA spokesperson Phakamile Hlubi-Majola pointed out the Mango board and DPE had known since May 2020 that the airline was in trouble, but had ignored labour's pleas that it should be placed in administration along with its parent, South African Airways (SA, Johannesburg O.R. Tambo). This was also true for the hardships endured by Mango staff who for months had continued working despite partial or non-payment of wages. “The shareholder is clearly not interested in saving the airline,” she charged. “DPE must be clear what agenda they are serving!” As reported previously, it took 14 months of prevarication, frustration, and pressure from the unions before the boards of Mango and SAA finally decided on April 16, 2021, to put the airline into administration.

Hlubi-Majola said DPE had not been able to explain why the pay-out of the ZAR819 million was delayed. ‘We’ve asked that question a million times,” she told ch-aviation.

She pointed out that SAA’s other subsidiaries, maintenance arm SAA Technical (SAAT), and catering firm Air Chefs were in the same dire straits as Mango, awaiting ZAR1.663 billion (USD115.8 million) and ZAR218 million (USD15.1 million) respectively in state aid. “DPE could have saved everybody a lot of pain if they had taken the right decision last year and had placed everyone in business rescue,” she said. “To date, DPE cannot give a logical explanation why this decision was not taken.”

She pointed out that should the business rescue application fail, Mango was likely to be liquidated as there was an existing application filed on April 28, 2021, by lessor Aergen over ZAR93.9 million (USD6.3 million) in unpaid lease payments. This forms part of Mango’s ZAR2.5 billion (USD168.4 million) debt, including ZAR717.7 million (USD49 million) in outstanding aircraft lease payments to various lessors; and ZAR1.8 billion (USD124 million) in unpaid bills to MROs Lufthansa Technik and SAAT.

Meanwhile, South African corruption watchdog OUTA (Organisation Undoing Tax Abuse) has pointed out the conflict of interest in the government saving Mango, while Takatso Consortium, its preferred strategic equity partner, has an interest in fellow budget carrier Lift Airlines (GE, Johannesburg O.R. Tambo). The startup brand is owned and operated by Global Aviation Operations (GE, Johannesburg O.R. Tambo), one of the two partners that make up the Takatso Consortium, the other being state-funded asset firm Harith General Partners.

“Some might argue that it would be in both the new SAA and Takatso’s interests if Mango folds, leaving them with more space for SAA and Lift to grow their share of the market. This development might suggest that Mango is being set up as the sacrificial lamb for the Takatso deal, with Mango’s creditors (including their staff) being compromised and the ZAR819 million will be used as post-commencement funding to clean out Mango and set it up for a possible merger with Lift. Should this take place, one might very well argue that the parliamentary process to approve the Special Appropriation Act has been abused, in order to facilitate a private transaction, which would be seen as a creative and immoral use of taxpayers’ funds in a highly dubious, if not a corrupt transaction,” OUTA argued.