Just as things have started looking up for South African Airways (SAA), its budget subsidiary airline may be forced to ground its fleet. Mango Airlines has been in debt for a while and has been defaulting on loans for over six months. Now, the airline will likely ground its fleet from Saturday, May 1st, because it owes money to the leasing company.
Troubles are not yet over the South African Airways group, even if they look slightly better for the main airline. SAA was awarded an additional R10.5 billion ($717 million) last October by the South African government. Part of the package was R2.7 billion ($188 million) to be given to subsidiaries Mango, SAA Technical, and Air Chefs.
However, while SAA has received some money, the South African parliament hasn’t yet approved the allocation of funds for the subsidiaries. Reports suggest that money will arrive in June, but that’s not soon enough for Mango. The airline has confirmed it will be paying April salaries but has not confirmed May salaries to be secure.
Why is the fleet being grounded?
Mango was operating a fleet of 14 Boeing 737-800s. But the airline doesn’t own all the aircraft. Previously it used aircraft leased from SAA Technical, but in September 2020, the airline ran into issues when it couldn’t pay SAA Technical for the aircraft. The airline was grounded for a week while it sorted things out.
However, the airline managed to reach a leasing agreement with third-party lessor Global Aviation Operations to allow it to continue flying. Now, just seven months later, the leasing company is reportedly forcing the airline to ground all aircraft until it can pay up. Media outlet TheSouthAfrican.com is quoting a letter from Mango CEO William Ndlovu to employees which reads,
“The lessors then put an ultimatum to Mango that should they not receive their money by 30 April 2021, then all their aircraft must be grounded until such time that Mango receives the money and is able to pay.”
What happens next?
The fate of Mango Airlines is strongly tied to its parent company SAA. The best outcome for the airline is that the money from the South African government arrives in June. This will allow the airline to pay the lessor the money it owes, and Mango can resume operations. If this happens, the airline will be placed into business rescue until July. Then, it can use the government loan to pay creditors and employees.
However, all of this will seem fairly fruitless unless SAA can also recover. Things are looking up for the airline, and it plans to resume flights within a few months. No exact date has been given, and it looks likely it will resume domestic operations before international flights. If SAA does resume operations and the money does arrive from the government, Mango may get another chance. However, the next few months will be critical.
What do you think of Mango’s problems? Do you think it will be able to survive the next few months? Get in touch and let us know your thoughts in the comments.