It’s Mayday for Mango airlines – SA Flyer’s Guy Leitch

Aviation analyst Guy Leitch discusses what's happening with SAA subsidiary Mango as the airline enters business rescue.
Published on

Aviation analyst and airline focused magazine owner Guy Leitch joins BizNews founder Alec Hogg to discuss what's happening with South African Airways (SAA) subsidiary Mango as the airline enters business rescue. This comes two years after SAA entered business rescue. The low cost carrier market is very competitive, with a number of domestic operators competing for relatively muted demand. Although airlines such as FlySafair have come out of the pandemic relatively unscathed, Mango has continued to lose market share and finds itself in a precarious position. Aviation expert Guy Leitch says that airline ticket holders and creditors mustn't expect too much back in compensation, stating that there may be nothing left to pay. – Justin Rowe-Roberts

On the businesses performance since the pandemic started: 

Well, it's tough as you rightly point out, the magazine, the print media space has been really constricted, really cramped just by the general decline in the middle way of advertising revenue from print. On top of that, of course, the whole general aviation industry has been under enormous pressure, particularly arising from the Covid-19 pandemic which has continued on for 15 months now. So we've been under a double squeeze, but fortunately, the brand is strong and we're doing the right thing and surviving.

On why Mango wasn't in business rescue earlier:

That is exactly the question. In fact, it was really a travesty and a big surprise to all of us back in December 2019 when SAA was put into business rescue without its subsidiaries. Its subsidiaries are dependent on SAA and if SAA flounders, the subsidiaries go down as well. So there's been enormous pressure on Mango to be put into business rescue, particularly with the Covid-19 crack down and it's always had probably the weakest, I was going to say balance sheet … the fact is that Mango doesn't have a balance sheet of its own because it's always just been wrapped up as a subsidiary of SAA. But that, in a sense, has been its undoing as well. Mango really just hasn't had the ability to develop a balance sheet of its own and hasn't had any sort of reserves with the ability to raise the finance or ancillary revenue sources that other airlines like, for instance, Flysafair, which has survived the current pandemic relatively unscathed, and Airlink which had made a very clear policy of investing into a solid balance sheet. So those airlines have done ok during the pandemic. Mango has been pretty much neglected or been the ugly stepchild in some senses of SAA and that's why it's quite frankly just not sustainable at this stage at all.

On Mango's market share in the industry: 

Yeah, its share of the pie has decreased from around 40% down to basically nothing at this stage. It's operating two, possibly three aircrafts in total. And its people are just not wanting to fly it, simply because they're so often getting their flights cancelled. You know, on time performance is such an important criteria for choosing which airline to fly. And if the airline is any risk of cancelling the flights on you, people are simply going to look elsewhere, particularly in such an intensely competitive market, as they say the 'African domestic market', particularly among the low cost carriers. I mean, we've clearly got an over traded market with Flysafair, Kulula and if you like BA coming back into the market, Lyft now also in the market and Mango, there's a glut of seats and there's price cutting. So there's no real margin opportunity for Mango there either.

On what happens if you've recently booked on Mango:

I think that they're going to enjoy what the industry so beautifully calls the cold comforts of the concurrent creditor. They're probably going to get this ghastly haircut. If you remember, the SAA concurrent creditors got seven cents out of the rand and even then they're struggling to get by that. I suspect Mango's concurrent creditors are going to get much the same sort of haircut. I think that one of the interesting aspects about this whole process is that it's being driven by labour once again, and the reason labor drives it is because they are essentially preferred tutors. So they're able to get their money out of the process quicker. But at the end of the day, I suspect that the aircraft landlords who are already on a hiding to nothing are going to get absolutely pounded. As well as, well who knows what's going to happen to the other state owned enterprises as these creditors.

Read also: 

Related Stories

No stories found.
BizNews
www.biznews.com