Flatlining budget airline Mango’s business rescue practitioner on Thursday night published a revised plan with a fundamental about-turn regarding its future.
This after the first attempt was published on 30 October and was met with resistance from shareholders SAA and Public Enterprises.
The pair were adamant that any notion of a restart be removed from the proposed roadmap pending investment from an investor.
It now says that a resumption of operations is impossible unless a partner is found.
Whereas business rescue practitioner Sipho Sono of Opis Advisory’s first opinion read that he believed that Mango should be able to restart successfully and said that: “The plan proposes that Mango resumes operations as soon as possible, but ideally by December 2021 to ensure that Mango preserves its route rights and licenses which may be critical for the investor and also to take advantage of the higher December demand.”
The document also noted a comprehensive restart plan was drafted.
SAA’s interim chair Professor John Lamola wrote to Sono on the day of first publication of the business rescue plan, saying that none of the bailout funds appropriated to Mango may be used for restart working capital.
In his response to the temporary chair, Sono pointed out that a restart was always part of the plan.
Sono also said: “Mango’s business is that of flying passengers, it is the only way it generates revenue. Not doing so, when, on a balance of probabilities Mango has a good chance of generating revenue to cover its overheads, is mostly value destructive.”
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Mango’s business rescue plan update included a disclaimer that noted SAA’s reticence to allow a restart.
It said: “Practitioner received the SAA letter indicating that Mango must not resume operations before the introduction of an Investor with requisite funding.”
Sono’s new business rescue plan almost quotes Lamola’ s correspondence verbatim.
It reads: “Any funding injected into Mango’s rescue process should not be applied to or fund working capital aimed at supporting the restart of Mango airline.”
This while pointing out the risk of Mango losing the only assets it really holds, route rights.
The document notes that the airline’s assets total R101 million. That’s R72 million less than what’s owed to passengers holding un-flown tickets.
Mango staff have drawn the short end of the stick. Last year, its 709 employees took voluntary pay cuts to help prop up the ailing carrier.
They are owed the equivalent of approximately 8 months’ pay and, at an estimated salary bill of R20 million a month, that’s R160 million of the airlines’ formidable R2.5 billion burden.
On liquidation of the company, staff only receive R 28,000 each, and un-flown customers join the queue of creditors who will get less than 5c to the Rand.
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According to a Mango pilot, most of the staff have now opted for voluntary severance packages.
This means that a restart is now out of the question anyway, and Sono’s letter to Lamola foreshadowed this.
He said: “With Mango not flying key staff members are already starting to look for jobs elsewhere. This will make a restart more difficult. The longer the airline is mothballed, the more costly a restart will be with larger associated risks.”
Wayne Duvenage of the Organisation Undoing Tax Abuse (Outa) said: “Mango was supposedly integral to SAA’s future plans; to now just a few months later be motivating to dispose of Mango and not using those funds to support its survival, smacks of sheer confusion, incompetence and poor management.
“However, this is what we have come to expect from our State-owned entities.”
Other taxpayer funded companies bleeding money included Denel, the Petroleum Oil and Gas Corporation and the SABC amongst others, while the Road Accident Fund plods along in the red.
President Ramaphosa admitted mid-year that the past five years has seen R1.5 trillion go missing from national coffers.
About parking Mango indefinitely, Sono warned in his letter to SAA: “A mothballed airline is guaranteed to be loss-making (further losses in this instance). It cannot generate revenue; it only incurs costs. Every day that Mango is not flying it is eroding its customer base.”
He added that a non-operational airline will be far less attractive for potential investors and narrow the pool.