Today, South African Airways’ subsidiary Mango Airlines entered into a form of bankruptcy protection called business rescue. The airline has been struggling for many months and relies on loans to survive. Three unions have been pushing for the airline to enter business rescue for several weeks to protect the airline from liquidation.
Just three months after South African Airways (SAA) managed to leave business rescue, its subsidiary has now entered bankruptcy protection. SAA underwent 17 months of restructuring before being declared solvent in April after entering protection in December 2019.
However, Mango Airlines didn’t declare bankruptcy at the same time as its parents’ company and wasn’t included in the government’s RA10.5 billion ($725 million) bailout loan last year. As a result, the airline defaulted on payments to creditors and was eventually forced to suspend flights after failing to pay airport fees.
In a statement on the website this morning, Mango Acting CEO, Mr William Ndlovu commented,
“Mango confirms that Operations will continue according to the airlines operating schedule as published. The details of the decision to place Mango under business rescue are still being finalized by all stakeholders. The details of the process will be made available as soon as possible.”
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Unions pushed for business rescue
Three unions representing most of the airlines’ 750 employees have been pushing hard for the airline to enter bankruptcy protection before august. Reportedly, one of the airline’s creditors planned to demand the airline was liquidated to pay debts. Unions wanted to protect the airline and restructure before this hearing.
So, although this isn’t good news for the airline, it is at least protected from liquidation to pay debts. With the airline now in business rescue and therefore protected, the SAA board can work on a restructuring plan to save the airline. This could include RA819 million ($55 million) that the government was supposed to provide to the airline last year.
What could the future Mango look like?
SAA had a long and complicated restructuring process, hopefully, lessons learned will mean that Mango’s restructuring is faster and more effective. Mango will likely undergo similar cuts to its parent, SAA.
SAA cut its workforce by around 80% to lower costs. If Mango does the same, that means about 600 people could lose their jobs. The airline has just nine aircraft with an average age of 20 years. Currently, only five are active. All of the airline’s aircraft are leased, so chances are, the airline will return at least some of them to the lessors.
This makes the future of Mango seem pretty bleak. Some think that the airline should be left to fail. Indeed, if the airline doesn’t restructure successfully, Business Insider South Africa reports that over 300,000 seats will be up for grabs on 173 weekly operations. This could provide plenty of opportunities for startup airline Lift as well as rival carrier Airlink.
What do you think of Mango’s future? We’d love to hear your thoughts in the comments.