Members of Parliament have raised questions about the sale of Mango Airlines and whether enough was done to keep the airline afloat. Some members wanted to know why Mango’s Business Rescue process did not happen at the same time as SAA.
But, SAA Board Chairperson, John Lamola, explains that the low-cost carrier was in a dire financial position, and this was exacerbated by the onset of Covid-19.
Parliament’s Portfolio Committee on Public Enterprises heard that a potential investor has been identified by Mango’s Business Rescue Practitioner.
The department’s Deputy Director General, Advocate Melanchton Makobe says they’re waiting on the BRP to make the next move.
“We are waiting for the business Rescue Practitioner to submit an application in terms of the PFMA for the approval; of that investor, so that we know who is that investor. We can then determine whether whatever they are putting on the table is something that we can accept as a government, whether it is viable. We will have to do our own due diligence and ensure that whatever offer is there, makes commercial sense.”
SAA chairperson, John Lamola, explained that at the time the decision was made to place Mango under business rescue, it was a mechanism to avoid it being liquidated as one of its creditors had applied.
He says a forensic report on the airline’s 2017/2018 financials showed that the reported profit of over 100 million Rand was questionable.
“The theory is that low-cost carriers are supposed to be more agile and more profitable, etc. But the reality that the board of SAA as the holders of 100 percent of the shares in Mango had to deal with Mango had to reckon with around April/May 2021, which was at the start of the financial year was the fact that Mango was not profitable. According to the financial year-end result of March 2019/20, Mango had deposited a loss of 134 million. The following year Mango had deposited a loss of R500m.”
Some members were skeptical about SAA’s motives in acquiring a private investor.
Judith Tshabalala of the ANC wanted to know why SAA stopped Mango’s resumption of flights in 2021 that were aimed at avoiding the involvement of a private investor.
She also raised strong objections to the 100% sale of the airline. “Experience shows that the private sector is not interested in buying unprofitable SOEs. Now if Mango is a loss-making SOE, what then are some of the reasons why the Private sector is interested in buying SOE? I want you to expand Dr Lamola on why the private sector is interested in buying the SOE if it’s unprofitable.”
Lamola gave a bleak assessment of Mango’s prospects given the kind of regulatory problems it is facing. “Currently Mango’s license is suspended for a period of two years. And there is also a risk that the AOC of Mango is in a dubious position because to sustain an airline operating certificate you have to undergo an audit by the SACAA and during that audit you have to prove that you have post-holder. That is key stuff that will ensure that when restarting the airline it will be run safely and sustainably. Mango does not have post-holders that will satisfy the sustenance of its AOC.”