Comair, Mango air service licences suspended

The Air Services Licensing Council has suspended two air services licences issued to low-cost airline Mango, a subsidiary of South African Airways.

In a letter addressed to the business rescue practitioner of Mango, seen by Fi24, the council reminds Sipho Sono of a meeting on 3 August to which he was invited.

The licences were suspended with immediate effect for a period of two years in terms of the Air Services Licensing Act.

In the view of the council, Sono had failed to Mango's non-compliance with the licence conditions.

"All I can say is that it is a very strange decision that does not consider the lack of competition in the domestic aviation market, with ticket prices gone through the roof. The decision was communicated to me late Friday, so I still need to consider it carefully and decide the next steps," Sono told Fin24 on Sunday afternoon.

"The Department of Public Enterprises indicated in the past that Mango cannot resume operations until it secured an investor. Now, when it is close to finalising the deal, the Department of Transport decides to shut Mango down."

Fin24 reported earlier this week that Sono's latest business rescue report to creditors indicated that one of the bidders for the airline has made significant progress, providing adequate proof of funding. The bidder is not named, but the report states that it is a consortium.

Agreement

A share subscription agreement was concluded with the preferred bidder on 28 July. One of the conditions of the subscription agreement is that the bidder consortium must provide a bank guarantee in favour of Mango for the full purchase consideration, on or before 10 August.

Mango went into voluntary business rescue at the end of July last year and has not flown since. It owes R2.85 billion to creditors, and also has about R183 million of unflown ticket liabilities. The only asset of value Mango has is a spare engine, and offers to buy it have been received.

Mango does not form part of the deal that will see the Takatso Consortium will obtain a 51% stake in SAA. Global Aviation, a minority shareholder of Takatso, operates its own airline, LIFT.

Mango can, therefore, not resume operations unless it secures an investor to buy and relaunch the airline. If such a sale fails and the rescue practitioner is not able to conclude a deal with a reserve bidder, the airline will be wound down. Then creditors will likely receive only 10c in the rand, Sono estimates.

All Mango's employees have been retrenched apart from a few retained on short-term contracts for critical care and maintenance activities required while the process to secure an investor continues. -Fin24