As the South Gauteng High Court made its final decision to liquidate regional airline SA Express, lawmakers debated the future of another struggling airline, Mango.

Addressing the portfolio committee on public enterprises on Wednesday (September 14), the department provided an update on the status of the Mango business rescue.

The airline entered voluntary business rescue on 28 July 2021, and business rescue specialists were appointed in August of the same year. The group was given 819 million rand to implement a rescue strategy that saw it cut operations and cut staff. Ultimately, all employees were either given the day off, fired, or resigned.

Of the 819 million rand, the airline received only 734 million rand after “prolonged discussions” between Mango, South African Airways (SAA) and the Department of Public Enterprises. After various legal fees and other costs, 256 million rand remains.

In November 2021, SAA proposed changes to the business rescue plan to rule out the resumption of Mango until an investor for the group is found.

Under this new plan, Mango had to find an investor to pay the bills to get the airline back up and running, including hiring new staff and leasing new planes. 2.8 billion rubles would also need to be allocated for payment to creditors.

Meanwhile, the Air Transport Licensing Council (ASLC), which suspended SA Express’s licences, effectively signing its death warrant, has also suspended Mango Airlines’ air transport licence, albeit for up to two years, while the business rescue process continues.

Mango received interested applications from investors in April 2022. According to the department, Mango’s survival prospects now look much more positive than its fallen competitors.

It said the as-yet-unnamed preferred bidder has provided the necessary proof of funds needed to secure its investment in the airline, with September and October 2022 set to complete the deal, as well as various regulatory and competition approvals. place

The department, however, cautioned that the airline is not out of the woods yet and that the government still needs to scrutinize the proposal and complete due diligence.

“A business rescue practitioner told us that an investor has been identified but it needs to be approved by the shareholders, the government. We are waiting for the business rescue specialist to apply through the Public Finance Management Act (PFMA) to approve the investor so we know who that investor is,” it said.

“Then we can determine whether what they’re putting on the table is something we can accept as a government – ​​whether it’s something viable. We will have to do our own due diligence and make sure that any offer makes commercial sense.

“Once we’ve made up our minds, we can come to the committee and explain the assessment of what the business rescue specialist has put on the table and whether we can approve it. If we can’t approve it, then (we have to determine) what happens next.”

Regarding the investor process, the department said that after going through expressions of interest, securing funding, providing evidence of funding and drafting transaction agreements, the government is now awaiting the PFMA application, which is expected shortly.

Airlines under pressure

South African airlines have come under extreme pressure after years of poor profitability and struggling with the Covid-19 pandemic.

The liquidation of SA Express on Wednesday was the latest blow to the sector following the closure of local airline Comair in June.

SA Express has been out of business since it was previously liquidated in April 2020 following failed attempts to save the business. Over the past two years, numerous attempts to sell the business have failed. Its liquidators stated in August that there was no way to save the enterprise.

Comair, meanwhile, closed for good in June 2022 after failing to secure the funding it needed to pull it out of financial difficulties, leading to business rescue specialists saying there was no longer a reasonable prospect of saving the company.

The local aviation industry has been left struggling since the shutdown, struggling with a loss of around 40% of capacity and rising fuel prices at the same time. The cumulative effect has caused ticket prices to rise by 50%.

While the sector has stabilized somewhat over the past month, ticket prices in South Africa remain high.

Read: Goodbye SA Express – final winding up order issued

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