An application will be made shortly to the department of public enterprises to evaluate the offer by a potential investor to purchase the state-owned, low-cost airline Mango, which is in business rescue.
It was reported last month that a consortium had made an offer to purchase the airline, a subsidiary of SAA, which has been purchased by the Takatso consortium.
The department’s deputy director-general for state-owned companies governance, assurance and performance, Melanchton Makobe, told MPs on Wednesday that the application by the business rescue practitioner Sipho Sono for approval of a deal is required in terms of the Public Finance Management Act.
The department, he said in a briefing on Mango’s business rescue process to parliament’s public enterprises committee, will have to assess if the proposed investor is credible, whether the offer makes commercial sense and decide on what percentage of the airline should be sold.
The department will also have to conduct its own due diligence of the potential investor, he added and if a deal is concluded, approvals would have to be obtained from the Air Services Licensing Council and the Competition Commission.
“If we get the right investor and we get the right deal we could see Mango in the sky again,” Makobe said. He noted that the initial expressions of interest in a deal were deficient as those concerned did not have sufficient funds.
The government allocated R819m for Mango’s restructuring of which R734m was advanced in tranches between August 2021 when the business rescue practitioner took over and May 2022 when the final tranche of R225m was advanced. An amount of R85m has been withheld by the department. Of the R734m, R477.8m has been spent (R25m on business rescue fees) and R256.2m remains for creditors and other payments. Creditors are owed R2.8bn.
The financial position of Mango was dire before it went into business rescue, a procedure aimed at facilitating the recovery of a financially distressed company that is placed under the temporary supervision of a business rescue practitioner who manages its affairs and keeps creditors at bay.
Resume operations
Mango had suffered two years of losses in 2020 and 2021 with grounding of airlines during the lockdowns due to the Covid-19 pandemic contributing to its woes. It was placed in business rescue at end-July 2021.
In terms of the business plan drawn up by the business rescue practitioner and amended by SAA, Mango will only resume operations when an investor comes on board.
SAA interim executive chair and CEO Malesela Lamola said that if Mango does not find an investor it will have to be wound down. Creditors have already accepted that they would take 4c in the rand in this event. SAA is owed about R400m by Mango. He said the strategic equity partner in Mango will have to show that it can make Mango into a viable operation and has enough money to run it sustainably for some time.
There were risks to Mango’s future, he said, as its airline operating certificate is “in a very dubious position” because to sustain it an airline company has to undergo an audit by the Civil Aviation Authority and prove that it has key staff to ensure that the airline will be run safely and sustainably. “Mango now does not have post holders that would satisfy the [maintenance] of its airline operating certificate.”
The suspension of Mango’s licence for two years by the Air Services Licensing Council in August is also a major risk as there is a danger of it losing lucrative routes.
• More than 700 workers employed by SA Express face job losses after the high court in Johannesburg confirmed the final liquidation of the airline, SABC reports. The liquidators applied for the liquidation of the airline in 2000 to recover more than R900m owed to creditors.
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