The proposed business rescue plan for South African Airways makes provision for R1 billion to go to the state-owned flag carrier’s low-cost subsidiary Mango.
This has raised concerns in the industry about the “legality” of Mango, which isn’t in business rescue, getting this kind of funding from the rescue of SAA by the state. If Mango gets this kind of help from the state, industry insiders are asking why other domestic airlines, also devastated by the coronavirus pandemic, should not also be helped.
Calls for such help to South Africa’s airline industry as a whole, have gone out on various occasions from industry bodies like the International Air Transport Association (IATA) and the Airline Association of Southern Africa (AASA).
“If Mango gets a helping hand from the state due to Covid-19, should other airlines in South Africa, equally affected by the pandemic and resulting lockdown, not be afforded equitable recompense?” says an industry insider, who wants to remain anonymous.
Aviation economist Joachim Vermooten points out that, in terms of the proposed SAA rescue plan, Mango will retain its capacity, so all its leases will continue. Yet, the private sector airlines in the country have been forced by the devastation of the coronavirus flight bans – instituted by government, who owns SAA and Mango, to reduce their capacity in anticipation of lower demand.
By allocating R1 billion from the SAA rescue plan to Mango, it is, therefore, getting preferred treatment by the state.
The rescue practitioners responded that, as a subsidiary of SAA, state-owned Mango is also a state asset. Therefore, “it is in the interest of the state to fund it, so that it can continue serving the SAA clients that are re-accommodated because of cancelled SAA flights”.
SAA’s creditors get to vote on the proposed rescue plan on 25 June, a day after Minister of Finance Tito Mboweni is due to announce a special emergency budget.
View of unions
The National Transport Movement (NTM) has welcomed the fact that the proposed SAA rescue plan provides for Mango will receive the cash injection.
“It is relief to the employees as a whole. Due to the current jobs bloodbath across the entire aviation industry due to the Covid-19 pandemic, we welcome the good news about the R1 billion proposed for Mango,” said NTM president Mashudu Raphetha.
He would like to see the Departments of Public Enterprises and of Tourism to collaborate and save aviation as a whole, due to its contribution to GDP.
Derek Mans, Solidarity’s organiser in the aviation industry, on the other hand, finds it upsetting that SAA’s rescue plan gives money to other state-owned companies, like subsidiary Mango, while the rest of the industry, such as private airlines FlySafair, Airlink and Comair, are suffering too.
For Phakamile Hlubi-Majola, spokesperson of the National Union of Metalworkers of SA (Numsa), the important point is not that subsidiaries of SAA should not be rescued as well, but that there must be consistency in the process of doing so.
She points out that, when SAA went into business rescue, government was adamant that it was not the case of its subsidiaries too. Now it has turned out that the Department of Public Enterprises wants Mango to be catered for as part of SAA’s rescue process.
“We want to avoid a situation where the Department of Public Enterprises can manipulate the rescue attempts of SAA and its subsidiaries,” she said.
Linden Birns, managing director of Plane Talking, points out that the entire aviation system in the country is financially vulnerable and weak as a result of government’s restrictions.
“The privately-owned airlines are in just as much need of financial relief as the SOEs, as are the industry’s infrastructure service providers, Airports Company SA (ACSA), Air Traffic Navigation Services (ATNS), the SA Weather Service, industry suppliers and service providers, as well as its safety regulator, the SA Civil Aviation Authority (SACAA),” comments Birns.
“Government should not be prioritising SAA at the expense of the rest of the country’s air transport industry and system. They all pay taxes, they all create and sustain jobs and spending in the economy, they all connect people, goods and services with markets and enable economic activity that benefits the entire country. It would be grossly unfair if government only provided relief to the SOEs.”