South African Airways said it didn’t sub-lease planes at a discount to low-cost unit Mango Airlines SOC Ltd., reversing an earlier statement after the budget carrier’s outgoing chief executive officer denied it was subsidized.
While SAA did sub-lease a number of aircraft to Mango over the past 10 years, an assessment of the transactions in March showed that “all such agreements had been concluded on a full cost-recovery basis,” the state-owned carrier said in a statement late Wednesday. “These aircraft were accordingly not leased at a discount.”
SAA said June 11 it sub-leased planes to Mango at a “substantially discounted cost” and paid the leasing company the market rate, an arrangement that could have given the budget carrier an advantage in South Africa’s competitive market. The statement was part of a response to the resignation of Mango CEO Nico Bezuidenhout, who will become the head of Africa-focused carrier FastJet Plc from Aug. 1.
The suggestion that Mango got cheap leases from its parent was “straightforward not true,” Bezuidenhout said in an interview on Wednesday. Mango pays market-related lease rates and since 2010 has negotiated new deals directly with leasing companies, he said.
SAA has been surviving on government debt guarantees and last posted a full-year profit in 2011. Mango, which connects South African cities including Johannesburg, Cape Town and Durban, was profitable in the year through March 2015 and made a loss in the most recent fiscal year, Bezuidenhout said.