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Should government save Mango or SAA

Should government save Mango or SAA

After all the time taken with the business rescue process of South African Airways (SAA), the end result could be that neither the state-owned flag carrier nor its subsidiaries – including low-cost airline Mango – survives, an economist warned.

The reason for this according to Peter Attard Montalto, head of Capital Markets Research at Intelidex is not focussing on the survival of “sustainable parts”

In his view, Mango should perhaps have been the center of any sustainable future for a state-owned airline, and not its parent company, SAA.

Unlike SAA, Mango and the other subsidiaries, SAA Technical (SAAT) and AirChefs, are not in business rescue.  On Wednesday, Mango was forced by Airports Company SA (ACSA) to suspend all flights due to monies owed for landing fees, parking fees and passenger service charges.  Following negotiations, ACSA lifted the suspension after Mango made certain payments.

SAAT, meanwhile, has entered a retrenchment process.  “Mango could have been rebranded with more flags.  Mango was a better base to build a recovery than the holding company and SAA.  Some expansion to regional and even international routes was deemed profitable.  This could have happened under appropriate management and with a strategic equity partner (SEP),” Montalto commented on Wednesday.

SAA’s shareholder, the Department of Public Enterprises (DPE), has been trying to get R2.7 billion of the R10.5 billion allocated to SAA in the medium-term budget in October last year to go to the airline’s subsidiaries – Mango, SAA Technical and AirChiefs.

Treasury requires Parliament to make a special allocation in this regard before the R2.7 billion can flow to subsidiaries.

“The Mango situation is a great shame because it is, underneath everything, a well-run and sustainable airline.  However, it has gotten caught out in the games going on over SAA in government and, in particular, the appropriations bill which has been inserted – perhaps unnecessarily – into this whole process to get the equity to recapitalise Mango and the other subsidiaries,” says Montalto.

Mango indicated that it is, as yet, unclear whether the airline would still be mothballed from 1 May, as reported last week.  The internal Mango communication stated that the executives and board of Mango, as well as the interim board of SAA, decided on this step after having had to fend off creditors for the past six months and not being able to stall them any longer.

A reliable source in the aviation industry, comments that “supposedly, all airlines operate on an equal footing”.  Yet, he cannot help but wonder how much credit is afforded to state-owned airlines Mango and SAA by other SOEs before they take the type of actions that ACSA finally took on Wednesday.  “Private entities don’t ever seem to get the same lifeline” he says.

Another industry insider agrees and claims private airlines would be grounded immediately, without any “conversation”, if money was owed.  He says apparently Mango’s aircraft lessors demanded re-delivery of eight aircraft as they have not been paid.

ACSA responded that the approach it takes with its business relationship with Mango is consistent with its approach to all other airlines.  It is based on the terms and conditions entered into contractually, the details of which remain confidential.  ACSA also indicated that, should Mango fall behind again, its flights would once again be suspended.

Mashudu Raphetha, general secretary of the Dynamic People’s Union of South Africa urged Mango and the DPE to find an urgent solution.  “The R2.7 billion is there.  It must just be distributed.  We cannot afford for mango te be grounded for a solution which is there.  Our members are panicking at the threat of Mango going into business rescue and salaries being suspended for two months,”  he said.

The union believes there is “a political squabble” aimed at destabilising workers at Mango.  “Prioritise Mango, SAA Technical and AirChefs for the group to resuscitate itself,” he says.

 


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