State-owned low-cost airline Mango is unlikely to be able to pay the salaries of its 500 or so employees from May as it battles to stay afloat.
The department of public enterprises said at the weekend that it is in discussions with the Mango board and the interim board of parent company SAA about repositioning the national carrier’s subsidiaries in light of delayed government funding.
The delay means Mango has to stop operating from May 1 and go into business rescue until July while it waits for funding, which was promised in June. SAA has been in business rescue since December 2019. Business rescue is a form of bankruptcy protection where administrators take over the company and work out whether it can be saved.
Mango operates a small fleet of 14 Boeing 737-800s around SA and into the region. It announced at the weekend that it would temporarily suspend flights amid a cash crunch. According to industry sources, while April salaries were paid at Mango, there is no money left to cover salaries for May.
The National Union of Metalworkers of SA (Numsa), a major union at the airline, blamed public enterprises minister Pravin Gordhan for the crisis at Mango. "We warned [the department] last year that subsidiaries of SAA should be placed in business rescue as well.
"But [they] ignored us," union spokesperson Phakamile Hlubi-Majola said on Sunday.
"To make matters worse they misled management and workers at subsidiaries that money from SAA’s business rescue was coming. There was no money for SAA subsidiaries because it was not catered for during the business rescue process.
"All SAA subsidiaries are in limbo until the money requested from Treasury has been allocated, which will be some time in June," she said.
In 2020, Mango announced that it would slash employee salaries in half after airlines were forced to cease operations to curb the spread of Covid-19.
While the government has moved to relax restrictions in recent months, demand for travel remains muted amid the slow rollout of vaccines and a shift to work from home and video conferencing, which have reduced demand for local air travel. Local airlines are also affected by the decision by international and regional airlines to curtail or suspend services to SA after a new Covid variant was detected late in 2020.
Department of public enterprises spokesperson Richard Mantu issued a statement at the weekend after reports of an internal memo sent by acting Mango CEO William Ndlovu on the operational challenges faced by the airline.
Mantu said Mango was expecting funds from the government as part of the R10.5bn allocation made to SAA in October’s medium-term budget policy statement.
However, for SAA subsidiaries Mango and SAA Technical to get the planned R2.7bn of this would have required a special appropriation bill. It has been tabled in parliament but not yet passed. "Once the bill is enacted into law the funds will be transferred to the subsidiaries," Mantu said.
In his memo, Ndlovu said after the passing of this appropriation bill, Mango was given to understand that it would get funds in January.
"We engaged with all the creditors and requested that we be given up until January 2021 to settle what is due to them, and this was granted. However, due to reasons unknown to us, we did not receive the funds in January 2021."
Then February was given as the payment date, but this did not materialise either, Ndlovu wrote. "Now we are in April with no sign of the money." At the beginning of April, Mango was informed that it would receive the money only in June.
"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. The lessors then put an ultimatum to Mango that should they not receive the money by April 30, all their aircraft must be grounded until such time as Mango receives the funds," Ndlovu said.
"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."
Mango management proposed to the Mango and SAA boards that it stop operating temporarily from May 1 and be put into business rescue until July. This proposal was approved by both boards, and SAA has forwarded this to the department.
The local airline industry has been on the brink of collapse since 2020, when the government moved to curtail travel in a bid to curb the spread of Covid-19. Big players — including state-owned SAA, which was struggling before Covid-19, and the previously profitable Kulula operator Comair — faced potential liquidation.
The latter returned to the skies in December, operating on a limited schedule. SAA has remained largely grounded as authorities battle to finalise the business rescue process amid clashes with unions over wages and severance packages.
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