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The business rescue practitioner (BRP) for Mango Airlines has warned that the group may have to abandon its rescue plan and start winding down proceedings.
In the fourteenth business rescue update for the group, the BRP said that a sudden turn of events had clouded the airline’s successful turnaround prospects.
While the BRP believes there is a reasonable prospect of rescuing the company, holdups from Mango’s main shareholder – the government – may make this impossible.
This is because the group is yet to receive a decision from the Department of Public Enterprises on an application for approval to dispose of South African Airways’ shares in Mango.
Mango was placed in voluntary business rescue on 28 July 2021, with business rescue practitioners appointed in August of that year. The group was allocated R819 million to execute a rescue strategy, which involved reducing operations and cutting staff. Ultimately, all staff were either given severance packages, retrenched, or resigned.
As part of the business rescue plan, the government, through the DPE, wants to dispose of its shareholding in the group and have the airline snapped up by private investors.
Near the end of 2022, despite a back-and-forth between SAA and Mango’s BRPs over the disposal details, the practitioners provided an optimistic update at the end of November, saying most of the issues were ironed out. At this point, the winding down of Mongo was deemed “unlikely”.
However, in the final update for 2022 – published in mid-January – the BRPs’ tone has changed significantly, with the process having apparently stalled as the group has not received confirmation of the disposal from the ministry.
“We understand that the Minister wrote to SAA on or about 20 December 2022, expressing a view that he was not completely satisfied with the responses to the queries raised by SAA.
“We further understand that SAA was also meant to receive a letter from National Treasury, communicating National Treasury’s view that the application will have to be resubmitted directly to National Treasury, and until that happens, National Treasury does not believe that the submission of the Application to DPE is complete,” the BRP said.
“The BRP has not been provided with copies of the letters from the DPE and National Treasury referenced above. However, following an SAA board meeting on Tuesday, 10 January 2023, the BRP was provided with a letter from SAA dated 11 January 2023 summarizing the DPE and National Treasury’s concerns.
“The BRP is considering the SAA letter to determine whether the issues raised are capable of resolution, and feedback in respect hereof will be provided to affected parties in due course,” it said.
Given this sudden turn of events, however, there is now the possibility that the transaction or investor process contemplated in the rescue plan may have to be abandoned and for the BRP to implement the wind-down process already incorporated in the adopted business rescue plan, the group said.
Mango’s position is complicated by the group having had its air licences suspended in August 2022 for two years after it remained grounded beyond the 12-month grace period afforded by the Air Services Licensing Council.
South Africa’s airline industry has been hit with several high-profile liquidations over the last year, with both Comair (Kulula) and SA Express being shut down.