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Court reserves judgement on Mango bankruptcy protection

A South African High Court judge on Friday, August 6, 2021, reserved judgement in a case in which three labour unions applied to place state-owned Mango Airlines (JE, Johannesburg O.R. Tambo) into bankruptcy protection after months of not having been paid.

Following an online hearing during which opposing counsels presented their heads of argument, Justice Michael Antonie of the Johannesburg division of the South African High Court reserved judgement in order to deliberate the case but promised to deliver detailed judgement no later than Wednesday, August 11, 2021.

As previously reported, the South African Cabin Crew Association (SACCA), the Mango Pilots Association (MPA), and the National Union of Metalworkers South Africa (NUMSA) have filed a joint application to place Mango in business rescue (a local form of bankruptcy protection), with the airline defending the application. This comes after months of frustration amongst employees who have either not been paid, or only partially paid, while Mango awaits ZAR819 million rand (USD57.3 million) of promised state aid to be made available. By April 2021, the airline was ZAR2.5 billion (USD168.4 million) in debt and only operating on a stop-start basis on two routes.

During Friday’s court proceedings, it emerged that an April 19, 2021, liquidation application against Mango, filed by two Aergen aircraft leasing companies (Aergen Aircraft Four Limited and Aergen Aircraft Five Limited) has been withdrawn.

From the arguments presented, it became clear that both sides want to put the airline into administration, but they are arguing about who is entitled to do so, and who can appoint the administrator. The shareholder (the South African government) is declining to join the unions in appointing a business rescue practitioner.

The online court proceedings on Friday centred on a legal debate and interpretation of the South African Companies Act and the Public Finances Management Act (PFMA) concerning the validity of the April 16, 2021, resolution by the Mango Board to place the airline into business rescue, as this decision was only approved three months later on July 22, 2021, by the shareholder representative, Public Enterprises Minister Pravin Gordhan. The government, on July 28, 2021, tried to have the airline put into administration. However, they were trumped by labour, which had already filed for the airline’s administration a day before, on July 27, 2021, and who want to appoint an administrator of their own choice.

The unions are arguing that Mango’s resolution to enter bankruptcy protection was invalid because the Companies Act stipulates that a Board resolution to file for bankruptcy protection must be filed within five days with South Africa’s Companies and Intellectual Property Commission (CIPC) in order to take effect.

“Millions were wasted in a lengthy South African Airways (SA, Johannesburg O.R. Tambo) business rescue process where consultants milked the process and earned millions, and workers suffered. We do not want to repeat the past, explained NUMSA spokesperson Phakamile Hlubi-Majola.

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