What will happen to Mango routes

What will happen to Mango routes
Mango Airlines, the low-cost arm of state-owned South African Airways (SAA), will be placed into business rescue, says SAA interim chief executive Thomas Kgokolo.

With the application for Comair’s liquidation and Mango in business rescue, there are a number of routes open and the opportunity for other airlines to take up those routes exists.

The right to fly between Johannesburg and Zanzibar is one of the most desirable and the most valuable resource that Mango has. Although it is almost a year since the low cost airline went in to business rescue, it still maintains the rights for the route, something that is controversial as there are other airlines keen to fly the route but until recently there was no International Air Services Council (IASC) to consider the applications from these other airlines. The Department of Transport simply extended all rights until a functioning IASC was constituted, which happened on 10 March. A new IASC was constituted and appointed on March 10.

Mango was still to receive the balance of the funds (R310 million) targeted by government specifically for the airline’s business rescue. Business Rescue Practitioner Sipho Sono, had to resort to instruct attorneys to issue an urgent application in the High Court iin order to get the money from the Department of Public Enterprise and SAA to pay over the money. Meetings followed and

Sono ended up agreeing that Mango would accept R225 million leaving the balance of R85 million to be used by government for some other purpose.

He advised creditors not to insist on payment of the R85 million as the outcome could be unpredictable. Sono said he had determines that without the R85 million a probable business rescue dividend of approximately 10 cents in the rand, on a wind-down basis (should the investor process not yield a positive outcome), is likely to be achieved and paid to creditors. He said this was substantially more than what was initially determined as the minimum probable dividend in the BR Plan.

“The inclusion of the R85 million would only see the probable dividend increase by approximately three cents in the rand but in all likelihood it would require the BRP to institute litigation, which comes with its own risks such as the uncertainty of an outcome and costs associated with litigation, as well as the possibility of the litigation delaying the finalisation of the investor process and completion of the business rescue process.”

There is apparently an unnamed preferred bidder who will become an equity partner in Mango and take Mango off the DPE’s hands. The payment by the bidder is to be deposited before the end of June failing which the winding-down process will begin.

However, there are still questions regarding the reason for the retainment of R85 million by the DPE or SAA as the money was allocated specifically for Mango, as well as the identity of the prefered bidder and the anount of the bid.