Council suspends Comair, Mango air service licences, rescue practitioner finds it 'strange'

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The Department of Public Enterprises indicated in the past that Mango cannot resume operations until it secured an investor.
The Department of Public Enterprises indicated in the past that Mango cannot resume operations until it secured an investor.
Mango
  • The Air Services Licensing Council has suspended two air services licences issued to low-cost airline Mango and licences of Comair.
  • The licences were suspended with immediate effect for a period of two years in terms of the Air Services Licensing Act.
  • Mango's business rescue practitioner says he finds it strange.
  • Get the biggest business stories emailed to you every weekday, or go to the Fin24 front page.

The Air Services Licensing Council has suspended two air services licences issued to low-cost airline Mango, a subsidiary of South African Airways.

In a letter addressed to the business rescue practitioner of Mango, seen by Fin24, the council reminds Sipho Sono of a meeting on 3 August to which he was invited.

The licences were suspended with immediate effect for a period of two years in terms of the Air Services Licensing Act.

In the view of the council, Sono had failed to Mango's non-compliance with the licence conditions.

"All I can say is that it is a very strange decision that does not consider the lack of competition in the domestic aviation market, with ticket prices gone through the roof. The decision was communicated to me late Friday, so I still need to consider it carefully and decide the next steps," Sono told Fin24 on Sunday afternoon.

"The Department of Public Enterprises indicated in the past that Mango cannot resume operations until it secured an investor. Now, when it is close to finalising the deal, the Department of Transport decides to shut Mango down."

Fin24 reported earlier this week that Sono's latest business rescue report to creditors indicated that one of the bidders for the airline has made significant progress, providing adequate proof of funding. The bidder is not named, but the report states that it is a consortium. 

ALSO READ | Mango rescue moves ahead as bidder delivers proof of funding

A share subscription agreement was concluded with the preferred bidder on 28 July. One of the conditions of the subscription agreement is that the bidder consortium must provide a bank guarantee in favour of Mango for the full purchase consideration, on or before 10 August.

Mango went into voluntary business rescue at the end of July last year and has not flown since. It owes R2.85 billion to creditors, and also has about R183 million of unflown ticket liabilities. The only asset of value Mango has is a spare engine, and offers to buy it have been received. 

Mango does not form part of the deal that will see the Takatso Consortium will obtain a 51% stake in SAA. Global Aviation, a minority shareholder of Takatso, operates its own airline, LIFT.

Mango can, therefore, not resume operations unless it secures an investor to buy and relaunch the airline. If such a sale fails and the rescue practitioner is not able to conclude a deal with a reserve bidder, the airline will be wound down. Then creditors will likely receive only 10c in the rand, Sono estimates. 

All Mango's employees have been retrenched apart from a few retained on short-term contracts for critical care and maintenance activities required while the process to secure an investor continues.

UPDATE: The council has also suspended two air service licences of Comair immediately and for a period of two years. Comair operated its own low-cost airline kulula.com as well as domestic and regional British Airways flights under a licence agreement. Comair was placed in provisional liquidation in June.

In a letter addressed to Comair's provisional liquidator, and seen by Fin24, the council says the suspension follows a violation of the requirements of the act.

Any party interested in buying Comair must show proof of funding of at least R500 million or US$50 million. The provisional liquidators have previously indicated that they received 21 letters of interest from parties who either want to buy the company as a going concern or purchase some of its assets. Because confidentiality agreements have been signed, the names of interested parties are not known.

The licences of state-owned regional airline SA Express, have been cancelled. SAX went into business rescue in February 2020. It was placed in provisional liquidation since April 2020 and has not operated since. Repeated attempts since then to conclude a sale of the airline had failed and in March this year the liquidators announced the re-opening of the bidding process.  

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