Mango risks being grounded in May

Mango Airlines could be grounded from May 1 due to lack of funds, according to an internal communication sent by acting CEO, William Ndlovu. 

Ndlovu says the low-cost South African Airways (SAA) subsidiary has been waiting since January to receive R2.7 billion out of the R10.5 billion allocated to SAA in October’s Medium-Term Budget Policy Statement.

Ndlovu says it was on this basis that Mango requested that its creditors give it additional time to make payments due to them. However, the funds that were expected from the Department of Public Enterprises (DPE) have not yet been received. 

Read: Testing times for subsidiaries caught up in SAA maelstrom

“At the beginning of April 2021 we were then informed that Mango will only receive funds in June 2021. This put Mango in a difficult situation as it relates to further extension from the creditors who could not wait any longer to be paid,” he says. 

Ndlovu adds that the airline’s lessor creditors have given Mango until the end of April to disburse funds owed to them. If funds are not received by then, creditors have requested that the airline be grounded until further notice. 

“We have been told by the shareholder that there will be no money received by Mango until June 2021. This means that Mango will not be able to operate from May 1, 2021, due to no aircraft being available for operations,” he says. 

While SAA has been under business rescue since December 2019, its subsidiaries Mango, SAA Technical and Air Chefs have not. The SAA business rescue practitioners are therefore not legally mandated to spend any of the post-commencement finance to assist the subsidiaries. 

Ndlovu’s internal communication says Mango management proposed to the company’s board of directors as well as SAA’s board that the airline halt its operations from May and be placed under business rescue from May until July. The proposal, according to Ndlovu, has been approved by both boards and is waiting for approval from the shareholder, the DPE. 

DPE spokesperson Richard Mantu and Mango spokesperson Benediction Zubane confirmed that both parties are in talks regarding the outstanding funds owed to Mango and the repositioning of SAA subsidiaries. 

SAA’s pilot row continues

Meanwhile SAA’s row with SAA Pilots’ Association (Saapa) over the three-decade-long regulator agreement (RA) and unpaid salaries remains unresolved. 

Read: SAA BRPs present ‘final’ settlement agreement to pilots

One issue of contention between the parties relates to whether severance payments to pilots who will be retrenched will be calculated in terms of the total cost of employment (TCE) prior to – or subsequent to – business rescue; the old TCE versus the new TCE.

Earlier this month, rescue practitioners Siviwe Dongwana and Les Matuson offered Saapa members who have been locked out of the airline since December 2020 a final settlement agreement of R214 million. This amount includes an ex-gratia payment of R85 million (paid over three years) “for the purposes of cancelling the regulating agreement” and R129 million for retrenchment packages. 

Saapa pilots who are currently on strike, have approached the Labour Court to declare the lockout unlawful and to prevent SAA from hiring “scrap labour” to replace its members. The association has agreed to terminate the RA but will not agree to pilots being retrenched on salaries that are 50% lower than what they earned. 

Had Saapa agreed to the settlement agreement proposed by rescue practitioners, its members would have received “R886 million, with the balance of ex-gratia and severance payments being made over the next three years with the first payment in the amount of R71 million being paid in August 2021,” the rescue practitioners said in a business rescue update on Thursday. 

The amount includes: 

• Unpaid salaries settlement for the months of April to November 2020 in the amount of R314 million 
• Notice pay in the amount of R68 million; 
• Leave pay in the amount of R184 million; and 
• 13th cheque payments in the amount of R137 million.

The business rescue practitioners say these ex-gratia payments and the full leave pay will no longer be available once the business rescue ends.

Read:
SAA administrators hope to exit by month-end
Government to foot the bill for ‘restructure’ of new SAA