Mango’s future is hanging by a thread

Embattled state-owned airline Mango is not dead yet, its business rescue practitioner Sipho Sono says, but its future is hanging by a thread held by public enterprises minister Pravin Gordhan.

Mango was placed in voluntary business rescue on 28 July 2021, with business rescue practitioners (BRP) 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 Department of Public Enterprises (DPE), wanted 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 BRP over the disposal details, the practitioners provided an optimistic update at the end of November, saying most of the issues were ironed out.

However, this tone changed significantly in January 2023, when Sono noted that a sudden turn of events had clouded the airline’s successful turnaround prospects.

The key warning from the practitioner was that holdups in government processes were making the unnamed private investors skittish about the deal. If the investors flew, the deal would be scuppered, and the company would have to be wound down, Sono warned.

The stumbling block appears to be a breakdown of communication between the government and the business rescue practitioner.

In January, the DPE, National Treasury and SAA raised issues around the disposal and the deal. The Mango BRP said he was only informed of these concerns much later than they were originally raised but proceeded to provide the necessary information to the department and Gordhan.

According to Sono, Gordhan rejected his response, and told him he didn’t have the authority to provide the information – delaying any approval of the deal until SAA provided the necessary information, putting the entire plan at risk.

“The minister suggested that the BRP had no authority to address correspondence directly to him,” Sono said.

“This left the BRP with three options – do nothing and hope that the Minister changes his mind and makes a decision before the preferred bidder withdraws from the process; approach the courts for relief; or institute the wind-down process.”

After taking legal advice, the BRP chose option two and approached the courts.

Massive hold-up

In the latest update on proceedings, Sono noted that the situation hasn’t changed, and the rescue process remains uncertain.

The practitioner said that the interested investor has agreed to keep its offer open, but this is pending the various court processes underway between the BRP and the government.

“The preferred bidder had expressed a desire to withdraw from the transaction if a decision on the process was not made by 28 February 2023. However, after writing to the preferred bidder, the preferred bidder has confirmed that it will not withdraw until the legal proceedings brought against the minister have been finalised,” Sono said.

“A risk still exists that the investor may pull out should the issues under contention not be resolved timeously.”

Because communication between the BRP and the Department of Public Enterprises has apparently hit a wall, Sono wants the courts to deliver an order that the lack of response from the department can be deemed to be an approval of its plans.

Alternatively, he wants the courts to compel the minister of public enterprises, Pravin Gordhan, to take a decision on the information currently before him.

However, instead of speeding the process up, the court case has had the opposite effect. The department, National Treasury, and their respective ministers have all filed notice opposing the application. Union Numsa has also joined proceedings.

The urgent application was due to be heard on 28 February 2023; however, due to the very late filing of the state respondents’ answering papers, as well as an intervening application brought by Numsa to join the BRP and Mango as a co-applicant, the whole process has been pushed back to 29 and 30 May 2023.

On top of Mango’s issues in getting the government on board, Sono is also chasing after the International Air Services Council (IASC).

The BRP is requesting the IASC to reconsider and reverse its decision to cancel Mango’s licence.

The letter also demanded reasons for the IASC’s decision in terms of Mango’s right to receive reasons under the International Air Services Act, 1993.

“Unfortunately, there has been no response from the IASC, and therefore, the reasons sought have not been provided. The BRP has therefore taken a decision to lodge an appeal against the decision of the IASC and instructed his attorneys to commence those proceedings,” Sono said.

The third court action being taken is regarding the Aviation Co-Ordination Services (ACS), a creditor of the group, which is challenging the business rescue plan. The BRP is opposing this.

Mango’s position is complicated by the group having 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.

Winding down

Sono said that he believes that Mango can still be rescued and that there is a reasonable prospect of doing so.

However, the whole plan is contingent on these court proceedings panning out with speed and in Mango’s favour.

In the event that they do not, or that the transaction with the unnamed investor fails – or indeed if the investor gets fed up and calls it quits – Sono said the BRP would implement the wind-down process for the group.

Read: Mango is in trouble