The Business Practitioner conducting the business rescue of Mango, Sipho Sono is currently seeking approval for the sale to an unnamed bidder of the airline, but now could have a fight on his hands to convince the committee that the carrier will ever be viable.
The deal will still have to undergo rigorous due diligence by the DPE, as the carrier’s sole shareholder.
Mango has around R2,8bn (€160m) in debt, aside from the R130m (€7.43m) it owes ticketholders in refunds for flights that never took place after it was grounded. Reports are that the DPE has already spent R734 million (€41.9m) on the rescue process to avoid liquidation.
MP Jabulile Mkhwanazi asked Professor John Lamola, SAA’s Executive Chairperson and Chief Executive (Mango is owned by SAA), if Mango would ask the government for funding if the investor failed to come through, in view of the fact that the airline’s assets were less than R1bn (€57m). If the bid fails, Mkhwanazi predicted that the airline will fail to pay its creditors. (Mango owns no assets, nor any aircraft, having historically leased them.) "The private sector is not interested in buying unprofitable state-owned enterprises. Will you then request funding from government if the investor does not come through?"
MP Jeanette Komane said: “There is not much confidence that Mango will be back in the skies by December.”
Lamola also said Mango risked losing its profitable routes and that there was "a scramble for air licensing rights", especially those historically played by Mango and SAA, which they could not sustain now.
At the meeting, concerns were aired that not only had Mango's operating licences been suspended by the Air Services Licensing Council but, in addition, the airline's regular updates to regulatory authorities had not been updated.
Lamola said the licences were suspended for 24 months, pending clarity with the business rescue process. Mango would have to retain the routes and the licences through ongoing engagement with the relevant authorities, including the ASLC, which Lamola said was no walkover.
But Sono does not seem to be fazed by the suspension and has already said he believes it will be lifted. He has gone on record saying that it had already been clarified by the DoT and its regulatory experts that the suspension could be overturned. He said in a Business Rescue Update on the Mango website earlier this year that the suspension “simply means that Mango may not resume operations until it can demonstrate to the Council that it is in a position to meet the conditions of the licences…To this extent, it is expected that the conclusion of the current investor process will place Mango in good stead to be able to meet the conditions of the licences”. He said Mango would submit an application to the Council for the amendment of the licences in terms of Section 14 of the Act and the airline believed that, on approval of that application, the suspension would be lifted.
However, although the BRP responded that the suspended licences were not a serious threat to the new bidder, Lamola said there was still a risk that the Air Operator Certificate (AOC) of Mango was in a dubious position because to sustain an airline operating certificate you had to undergo an audit by the SACAA and during that audit the airline had to prove that it had certain posts filled by duly qualified people. “That is key stuff that will ensure that when restarting the airline, it will be run safely and sustainably. Mango does not have post-holders that will satisfy the sustenance of its AOC,” said Lamola in Parliament.
