- Low-cost airline Mango is a subsidiary of state-owned SAA and has been in business rescue since July this year.
- Creditors were supposed to vote on a proposed rescue plan for Mango on Monday.
- The meeting was, however, postponed because SAA wants the plan to be amended in terms of what funding can be used for.
It is now clear that low-cost airline Mango will be mothballed for a considerable period, as the process of securing an investor will take some time, the low-cost airline’s business rescue practitioner Sipho Sono said on Monday afternoon, following a meeting of creditors who were supposed to vote on his proposed rescue plan.
The meeting on Monday of Mango’s creditors to vote on the proposed business rescue plan for the low-cost airline, was postponed because its shareholder, state-owned South African Airways (SAA), wanted an amendment.
An amended plan will inevitably have to consider a greater number of employees being potentially affected by the restructuring than is the case in the current proposed plan that was published on 29 October 2021, according to Sono.
Mango, a subsidiary of SAA, stopped flying at the end of July this year when it went into business rescue. It is about R2.5 billion in debt and risks losing its route rights if its return to the skies is delayed.
In the current proposed rescue plan, Sono was keen for Mango to restart operations in December to benefit from the peak summer traffic. He wanted to use some of the R719 million still due to Mango in terms of a special allocation made by Parliament from the R10.5 billion allocated for SAA’s own rescue plan.
The special allocation process was driven by SAA’s shareholder, the Department of Public Enterprises. However, SAA’s board made it clear that it is only willing to supply funding for Mango’s restructure and not to restart operations. SAA wants an investor to finance any restart. The proposed plan will now be amended to read as such and a meeting of creditors will be called in due course to vote on it.
“SAA, in its capacity as the sole shareholder of Mango, proposed a motion for the meeting to be adjourned to incorporate certain proposals that will enable both SAA and the ultimate shareholder, namely the Department of Public Enterprises (DPE) to support the plan. The substance of SAA’s proposed amendment is that the plan be amended to effectively cater for resumption of operations only once the process of securing an investor has been concluded, with a preferred bidder having been identified,” Sono explained in his statement on Monday afternoon.
Derek Mans, sector coordinator for defence and aerospace at trade union Solidarity, says it the union’s understanding that the funding which will be provided for the restructuring of Mango will include that of voluntary severance packages (VSPs) and outstanding salaries. According to the union’s calculations, the amount for these two aspects could be about R320 million.
The process of offering VSPs to Mango’s approximately 700 employees is currently under way and Sono has indicated that he hopes to have it finalised by the end of November.
“Solidarity is at least happy that employees who want to leave will now at least get their VSPs and outstanding salaries, so they can go on with their lives. What is, however, unclear is what the future holds for those who do not want to apply for VSPs. We hope an investor comes on board quickly and that there will not be strings attached from the shareholder as to who they need to choose to take over Mango,” commented Mans.
Zazi Nsibanyoni-Mugambi, president of the South African Cabin Crew Association (SACCA), is disappointed that the proposed rescue plan was not accepted as is.
“We thought the proposed plan could be successful, but it was rejected by SAA as shareholder. The amendment SAA wants is, in our opinion, basically the shareholder once again interfering and trying to micro-manage the business rescue process to yield to its demands. The consequences are, in our opinion, to get as many people to take VSPs as possible so you hardly have an airline left,” she commented on Monday after the meeting.
“It makes no sense that R819 million be used only for restructuring. We will see what the amended rescue plan looks like. Unfortunately, it seems the rescue practitioner is between a rock and a hard place.”
In SACCA’s view, an amended rescue plan – which does not provide funding to restart operations – will impact the willingness of the lessor of aircraft to Mango to continue doing so and might also impact what creditors get out in the end.
“It is a lose-lose situation and one should ask yourself why the shareholder did not vote for Mango to take to the skies as soon as possible in order to increase its chances to survive,” said Nsibanyoni-Mugambi.
“We take a keen interest to see who the strategic equity partner will be and we hope the shareholder does not interfere in that again as well.”
In his current proposed rescue plan, Sono argued that, if Mango did not restart soon, its value to any potential investor could be eroded. He indicated that a mothballed airline, on the other hand, was guaranteed to be loss-making, eroding its customer base, and putting its route rights at risk. SAA’s board, however, believes it would be too soon for Mango to start flying again by December.
The unions have claimed in the past that they believed the R719 million still due to Mango from the special appropriation was being “held ransom” to prevent it from restarting operations and thus competing with its parent company SAA, as well as low-cost airline LIFT, which was owned by a member of SAA’s chosen equity partner, the Takatso consortium.
LIFT co-founder and Takatso consortium partner Gidon Novick denied any connection between the decision to cut ties with Mango, and LIFT being part of a Takatso consortium partner.
“There is no misalignment between the SAA board and the rescue practitioner, rather, it is a matter of when operations should resume,” commented SAA board chair Prof. John Lamola last week.
With regards to un-flown Mango tickets, Sono said it is still intended that affected customers be afforded an option of flying once Mango resumes operations, although currently Sono is not able to commit to a specific date from which holders of un-flown tickets will be able to start using their vouchers. Those customers wishing to convert their tickets to claims, will receive the same dividend that is offered to concurrent creditors.
SAA responded to say that, in its view, there are no reasonable prospects of Mango succeeding should it be operationalised prior to obtaining an investor or equity partner. SAA’s position is that this process should be finalised as soon as possible and Mango operations only resume thereafter in order to mitigate the risk of Mango not being able to financially sustain itself going forward.
“The current aviation environment the world over is highly volatile and there are variables which cannot be predicted with any level of certainty, chief among them are probable new waves of Covid-19. SAA is looking forward to cooperating with the rescue practitioner as he finalises a rescue plan,” said SAA.
* This article was updated at 18:40 to reflect SAA’s response.
Source by www.news24.com