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Gigaba: State never gave Mango a bailout

Nov 06 2012 16:32 James-Brent Styan

A war of words erupted among 1time rivals after the low cost carrier filed for liquidation.

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Cape Town – The demise of low-cost carrier 1time has led to a full-scale war of words between representatives of the two biggest remaining players in the market, Mango and Comair.

Following allegations made in the media by Comair CEO Erik Venter that Mango has lost around R500m since inception, the shareholder of Mango has just released a statement. It said: “Mango has never, and is unlikely ever to, participate in any benefit of capitalisation of its parent company.”

Mango is a subsidiary of state-owned carrier South African Airways (SAA).

Minister of Public Enterprises Malusi Gigaba said in the statement that Mango remains, “as from day one, an entity operating independently from its shareholder”.

Gigaba said the statement is in response to allegations that Mango is being subsidised and bailed out by government.

“In good faith and in the spirit of transparency, I have elected to make Mango’s current, calendar year-to-date cash flow statement (movement) available. Salient points include that Mango did not benefit from any capitalisation or guarantee issued in favour of its parent company,” said Gigaba.

SAA recently received a guarantee of R5bn from government dated September 1.

The Mango cash flow statement just released is dated September 30 and does not show any money flowing to Mango.

Gigaba further said that there is no cross-subsidisation between SAA and Mango. He said as an example  that fuel procurement is a function of independently negotiated contracts directly between Mango and its fuel suppliers.

“It’s further worth pointing out that the arrangement between SAA and Mango has been reviewed by the Competition Commission prior to the inception of the entity.”

According to the data the minister released on Tuesday afternoon, Mango has maintained a bottom-line profitability through the challenges posed by record fuel prices in 2008 (breakeven FY2008), depressed demand associated with the global economic crisis of 2009 (R10.9m profit), a stable year in 2010 (R13.7m profit) and a challenging 2011 (R300k profit).

“(Because of) A combination of high fuel cost, increases in airport taxes, demand slump and excess supply following the entry of Velvet Sky in 2011, Mango did suffer a loss in 2012 amounting to approximately R58 per passenger, or roughly equivalent to the increases in regulatory charges.

"The company is however again on track to return a profit for the current fiscal. The assertion that Mango has realised excessive losses since its inception is therefore accordingly factually incorrect.”

Gigaba further criticised Comair statements against Mango.

“Comair chooses to assert underhanded practices on the part of Mango, when in fact Comair competed with 1time on every one of 1time’s eight domestic routes, whereas Mango competed on three routes only.

"What’s more, the only Competition Commission complaint lodged by 1time during its existence was aimed at Kulula,” Gigaba said.

 - Fin24

Follow James-Brent Styan on @jamesstyan.


1time  |  mango  |  kulula  |  low cost airlines
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