The flight operations of Mango Airlines will be grounded from 1 May as the low-cost airline is fast running out of cash and struggles to pay creditors that have knocked on its door for repayments.
Mango Airlines is a subsidiary of SAA and its financial crisis delivers another blow to SA’s state-owned airline industry.
In a memo to Mango workers, which was obtained by Business Maverick, acting CEO William Ndlovu said the airline’s flight operations will “temporarily stop” from 1 May 2021 until emergency funds can be sourced to pay creditors, including aircraft lessors.
Mango is owned by the government (represented by the Department of Public Enterprises). Since 2020, Mango’s executive management and interim board have been in talks with the government about a taxpayer-funded bailout for the airline – funds that can be used to pay creditors.
Ndlovu said the government first promised to make allocations of funds for Mango in the October 2020 Medium Term Budget Policy Statement. Mango used this promise from the government to convince creditors to grant it an extension until January 2021 for repayments.
“However, due to reasons unknown to us, we did not receive the funds in January 2021. We engaged the relevant stakeholders and were told to wait, maybe in February 2021 the money will come. We are now in April with no sign of money,” said Ndlovu in the memo to Mango staff dated 22 April 2021.
He said at the beginning of April 2021, the government informed Mango that the airline would 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.”
Without the funds from the government, Mango’s aircraft lessors have given the airline an ultimatum; pay the money owed by 30 April 2021 or have Mango’s flight operations grounded because lessors will refuse to supply the airline with aircraft. Ndlovu said Mango will be grounded because the airline’s executive management and board have been informed by the government that “there will be no money received by Mango until June 2021”.
It’s not clear how much money Mango owes creditors as its audited financial statements are never released for public consumption. A Mango spokesperson didn’t disclose the amount of money it owes to creditors but told Business Maverick that “the amount is significant”. The airline also didn’t disclose how much money it needs from the government. “While discussions are still ongoing, we have, however, quantified the actual immediate funds we would need and we can only share with you once we have reached an agreement with the shareholder,” the spokesperson said.
As Mango’s financial situation continues to deteriorate, the executive management and board have asked the government for permission to voluntarily submit the airline under a business rescue process – just like SAA.
The executive management and board are still waiting for approval from the government regarding placing Mango under a business rescue process. The Department of Public Enterprises released a terse statement saying it is in ongoing “discussions with the interim boards of Mango and SAA about the repositioning of the subsidiaries in light of the delayed funding”.
A business rescue process would buy Mango time and breathing space as outstanding payments to creditors would be immediately suspended until the airline’s operations have been successfully restructured.
SAA has been in a business rescue process for 16 months, a restructuring process that excludes its subsidiaries including Mango, SAA Technical (aircraft maintenance), Air Chefs (in-flight catering), and SAA Cargo (air freight). That the SAA subsidiaries were not included in SAA’s business rescue process means that they have not received funding from the government.
The SAA business rescue practitioners estimated that Mango requires at least R1-billion from the government for its restructuring and recapitalisation. The funding would be used to provide Mango working capital amounting to R510-million and about R440-million will go towards paying the airline’s debt. BM/DM