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Thursday / 20 June 2024
HomeNewsOne of South Africa’s biggest budget airlines could be making a comeback

One of South Africa’s biggest budget airlines could be making a comeback

Mango, one of South Africa’s most recognizable budget airlines, could soon be making a comeback after roughly three years of being grounded.

The airline’s sale to a private entity is set to proceed, laying the foundation needed for its orange aircraft to take to the skies once more.

Years of delays

Mango is a 100% state-owned subsidiary of South African Airways (SAA) and was operational until July 2021 when the travel constraints of the Covid-19 lockdown sent the company into business rescue.

Its parent company went into voluntary business rescue the same year following extended periods of financial losses, and it was decided at the time that SAA would begin selling off assets as part of a restructuring process to make it commercially viable again, which included the sale of Mango.

Mango, which was actually a bright spot in SAA’s otherwise poor financial track record, already had a business rescue plan published by November 2021, according to MyBroadband.

Its business rescue practitioner (BRP), Sipho Sono, argued that the company had a decent chance of success if it received the necessary working capital in time – a sum that included R719 million of the R819 million that SAA owed Mango as part of a bailout package approved by parliament.

However, SAA argued that the plan would not be feasible until a private buyer was secured, which Sono managed to do in early 2022. The investor was able to deliver proof of funding to acquire the airline by August 2022.

The final amount was never disclosed, but Mango’s rescue plan did state that it would require at least R200 million to resume operations.

Once the buyer had supplied the necessary bank guarantee for the full purchase price, the Department of Public Enterprises (DPE) was asked to sign off on the deal, in line with the Public Finance Management Act (PFMA).

However, Public Enterprises Minister Pravin Gordhan was slow to make a decision, which ultimately led to Mango’s BRPs taking legal action.

In September 2023, the North Gauteng High Court ruled that the minister had to decide whether Mango could be sold within 30 days, to which Gordhan made an application for leave to appeal to the Supreme Court of Appeal (SCA), but this was rejected on 15 March 2024.

Mango’s BRPs stated that even if the SCA had heard the matter, it would not have changed anything as the minister had failed to make a decision within the stipulated 30-day window and that no reason had been given as to why the deal should not be finalized.

Conflicting interests

At the same this was happening, private equity firm Takatso Consortium made a bid for a controlling stake of 51% in SAA, throwing a wrench into the works of the Mango sale.

The Mango Pilots’ Association spokesperson Jordan Butler commented at the time that he believed the reason for the slow response to approve Mango’s rescue plan was because the airline’s re-emergence would threaten the sale of SAA.

One of Takatso’s businesses includes Lift, which is another budget airline in South Africa that is a direct competitor to Mango.

“All three, SAA, Mango, and Lift, cannot exist in the same arena,” said Butler.

However, the sale of SAA recently fell through following a failed attempt at renegotiating the deal that would have seen the state asset sold for just R51, potentially opening the doors for the Mango sale to go ahead.

Good news for flight prices

Mango’s absence from the airwaves has had a detrimental effect on local flight prices, as the market is experiencing severe constraints on its seat availability.

In the same period that Mango was grounded, Comair and Kulula both went out of business, so the domestic space is currently operated by just three airlines – Airlink, Lift, and FlySafair – and the result is that there is less capacity than before the pandemic.

Sono told MyBroadband that it is too early to confirm any potential dates for Mango’s relaunch as there are multiple factors that still need to be addressed.

This includes reapplying for its operating licence, which was suspended in 2021 as a consequence of not flying for over a year, and disclosing the value of the deal’s value to the airline’s creditors.

In any case, the return of Mango could soon result in better flight availability and lower travel costs for South Africa’s frequent flyers.

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