South African Airways can no longer depend on financial support from government, the Pravin Gordhan-led Department of Public Enterprises said on Tuesday evening.
During a meeting with unions representing workers at the troubled airline, the state was not in a position to provide more capital and that all parties need to commit to a creative solution to avoid the business rescue process failing.
A consultative forum will be established for talks on how best to ensure the well-being of employees, the department said.
The unions agreed that some jobs will be lost, and that employees who remain behind will need to sacrifice some of the “unaffordable arrangements that had worsened the airline’s financial position,” it said.
Representatives of the SA Transport and Allied Workers Union, National Union of Metalworkers of SA, the SAA Pilots’ Association, the National Transport Movement, the Aviation Union of Southern Africa and the Southern Africa Cabine Crew Association were among those in attendance.
Analyst Peter Attard Montalto says there are lots of different ways “to skin the SAA cat”, but anything resembling the status quo will not fly.
“Mango is viable but would become non-viable if strapped with loss making regional and global routes. I don’t think there was any doubt that, bar an accident, Mango would survive. However, the point is liquidation of the parent and sale of the subsidiary,” said Montalto.
For him, a key issue government will have to deal with is that of majority and minority stakes. “National Treasury is not going to have the money nor want to insert new equity and so they are going to have to give control and a majority stake to anyone in the private sector giving equity. Overall, then, the phraseology here on a new airline needs to be carefully deconstructed,” said Montalto.
For independent aviation economist Joachim Vermooten, this opens an opportunity to develop a new start-up international and cargo carrier with limited scope, to be funded in the private sector with the assistance of a substantive successful carrier.
It is estimated that over approximately 14 years, the state-owned flag carrier has incurred over R28 billion in cumulative losses, though it has repeatedly been given lifelines thanks to government assistance or guarantees. In Budget 2020, for example, SAA was allocated R16.4 billion, of which R11.2 billion was for the airline’s debt servicing costs.
The DPE informed the BRPs last week that it had turned down a request for an additional R10 billion in funding. The BRPs were told in a letter that they would have to continue with the business rescue process with whatever resources are available.