Unions plead for SAA subsidiary Mango to be placed in business rescue as funds still outstanding

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The situation for staff at Mango is dire.
The situation for staff at Mango is dire.
  • A Special Appropriations Act that approved R2.7 billion from money allocated to SAA to go to its financially troubled subsidiaries has already come into effect.
  • Low-cost SAA subsidiary airline Mango has to date not received any of this money.
  • Two unions have since urged government to put Mango in business rescue to try to save the airline.

Low-cost airline Mango is still in dire financial straits despite Parliament having approved a special allocation of R2.7 billion for SAA subsidiaries – and now two unions are calling for it to be placed in business rescue as soon as possible.

The Mango Pilots' Association (MPA) and the SA Cabin Crew Association (SACCA) have written to Public Enterprises Minister Pravin Gordhan, the Department of Public Enterprises (DPE) and the SAA board in a letter dated 15 July, seen by Fin24, stating that the matter is "urgent".

On Friday, the MPA and the SACCA informed members that the unions had a meeting with the DPE about the dire situation at Mango. Combined, the two unions represent about 450 employees (about 61%) of Mango.

Unlike its parent SAA, Mango was not previously placed in business rescue.

The Special Appropriations Act enables R819 million of the R10.5 billion allocated to SAA in the mini-budget last year to go to Mango, R1.663 billion to go to SAA Technical (SAAT), and R218 million to go to Air Chefs.

Mango employees' salaries for June are still outstanding, and the preceding months saw them receiving partial salary payments. With the exception of September and December last year and February to May this year, when they got full salary payments, Mango employees have been receiving partial salary payments since April 2020. The partial payments were sometimes as little as 5% (April and May 2020), 15% (June 2020), 20% (August 2020) and 50% (January 2021). On average, Mango employees are owed about six months' worth of salaries.

This year, employees received 50% in January, but 100% in February, March, April and May. On average, Mango employees are owed about six months' salaries.

Employees at SAAT received their full salaries for June, and the company is undergoing a retrenchment process. This is not the case at Mango.

"Business rescue has now become urgent," the MPA and SACCA write in their letter to the DPE and SAA board. Mango currently only has one director and the SAA board is, therefore, tasked with overseeing matters related to the low-cost airline.

No business rescue, no transfer

According to the letter to members, also seen by Fin24, the DPE told unions that there has been no transfer to Mango yet of the R819 million earmarked for Mango from SAA.

It is understood that the transfer cannot be made until there is either a business rescue process in place or a restructuring plan is approved by the SAA board.

"They cannot release emergency finance payments from SAA due to legalities. They have said the plan will be finalised in a few days and have undertaken to provide feedback," the letter to members states.

"The situation is dire for the staff. Once in business rescue there is provision for salaries to be paid. We know these are extremely difficult times and ask that those that can assist to please assist to continue the operation to please do so."

In the letter addressed to the DPE, Gordhan and the SAA board, the two unions say that it is its understanding from the meeting with the DPE that to procure the allocation of the funds contemplated in terms of the special allocation by Parliament to Mango, and by extension its operations and employees, Mango would have to be placed into business rescue. 

"We appreciate and understand that for a business rescue process to be meaningful, a proper business rescue plan has to be presented and that any funding that would flow would be pursuant to the adoption and approach of such a plan. We are also concerned that the production and implementation of a business plan might take some time and that this would leave the employees of Mango in a dire situation," states the letter.

"It is for this reason that we propose that Mango be placed into business rescue urgently and that proactive business rescue practitioners be appointed in order to run the business and ensure funds contemplated in the Special Appropriation Act are provided to Mango in order to ensure continuity of service for the South African consumer, preservation of Mango's aircrafts and other assets and the financial survival Mango's 741 employees."

The letter to the DPE, Gordhan and SAA further refers to an impending liquidation application against Mango brought by Aergen Aircraft. The date for hearing of the application has been postponed after Mango negotiated with the company.

Mango's market share had dropped from 30% in June 2020 to about 14% by April this year, the DPE told Parliament earlier this year. When SAA was put in business rescue, SACCA was one of the unions that questioned why its subsidiaries were not placed in business rescue as well.

The DPE told Parliament in the past that operational inefficiencies at Mango were mainly due to aircraft having to remain on the ground because of inadequate support from SAAT, which is also in a financial crunch. It said Mango's funding required is mainly to pay accumulated debt. To position the airline for the future, the DPE recommended that changed market circumstances and the future plans of SAA be taken into consideration.

Mango is currently only operating two aircraft.

The Dynamic Peoples Union of South Africa (Dypusa) a new union which focuses on aviation, logistics and freight is also in favour of Mango, and potentially the other SAA subsidiaries, being placed in business rescue.

"It is important that any way forward for SAA's subsidiaries includes active participation of its employees," the union's general secretary Mashudu Raphetha said on Monday.

He also expressed concern that SAA's new strategic equity partner, the Takatso consortium, might perhaps want to replace Mango with low-cost private airline LIFT, which is owned by one of the consortium members. The consortium and DPE have indicated in the past that a due diligence process is still underway regarding the partnership and that includes looking at the optimum business model for SAA and its subsidiaries. 

* Fin24 approached the DPE for comment since last week but has not been able to obtain any. Should any comment be received, this article will be updated. Treasury has referred Fin24 to the DPE for comment.

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