After years of secrecy around Mango’s true financial status, court papers reveal the budget airline is drowning under a debt of R2.5bn, Rapport reports.

The SAA subsidiary has been punted as one of the successful and profitable state-owned companies, but many industry experts are questioning the extent to which the budget airline was subsidised and bankrolled through SAA.

According to the court papers filed by three trade unions who want the airline placed in business rescue, Mango owes the Air Traffic Navigation Service (ATNS) R57m, the Airports Company of SA (Acsa) R156m, and SAA Technical R718m.

The government’s promised R819m to restructure the airline is dwarfed by its total debt of R2.5bn.

Transport economist Joachim Vermooten said Mango once had a market share of 30%, but this has dwindled to 10%.

Of a fleet of 14 aircraft, only three remain.

Derek Mans, of Solidarity, said the debt owed to other key role-players in the aviation industry such as Acsa, ATNS and SAA Technical places placed the entire industry at risk.

ATNS is in the process of retrenching 172 of its 1 000 employees while SAA Technical was forced to let go 1 200 workers and the remaining 857 had to accept pay cuts, Mans said.

Although the Department of Public Enterprises, as well as the boards of SAA and Mango, have publicly indicated their support for business rescue to save Mango, the unions say in their application that they have yet to formally endorse the business rescue application.

The unions want, as a condition for the business rescue, payment of at least two months’ salaries to employees.

The estimated debt for outstanding salaries amounts to R157m. The projected business rescue plan is forecasting a loss of R3m for the current financial year, followed by profits of R97m and R146m.

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Mango’s attempt to be placed into voluntarily business rescue has been rejected by the companies regulator on the grounds that the carrier filed its application three months too late.

Business Day says the Companies and Intellectual Property Commission (CIPC) requires companies to file an application to be placed in business rescue five days after a board resolution to do so. Mango, however, only filed its application to CIPC commissioner Rory Voller on 28 July while Mango’s board resolved to have the airline placed in business rescue on 16 April, according to court documents.

In court papers, Mango CEO William Ndlovu accuses the CIPC of going beyond its legal authority when it rejected the airline’s business rescue application in July, arguing that it does not have the authority to determine the validity of the airline’s board resolution.

‘The CIPC is simply not empowered, on any interpretation of section 129 of the (Companies) Act or otherwise, to decide unilaterally that it can (i) refuse to process the BR (business rescue) resolution on the basis that it was adopted more than five days prior to the filing, and (ii) refuse to make a change to the company’s enterprise status to ‘in business rescue’ once the BR resolution had been filed with the CIPC,’ Ndlovu says.

Ndlovu also wants the application by unions to force the airline to be placed in business rescue to be dismissed because the airline has already commenced business rescue proceedings as per its April board resolution.

Mango’s application to the CIPC was only filed after the unions at the airline approached the Gauteng High Court (Johannesburg) to force the company to be placed in business rescue in line with the board resolution and the approval from its parent company, SAA, and the government.

Full Business Day report