The “immediate threat” of the liquidation of South African Airways (SAA) has been averted, the Department of Public Enterprises (DPE) announced on Saturday evening.
Employees of SAA have also been granted an extention of the deadline by which they have to sign a section 189 termination of employment agreement proposed by the state-owned airline’s business rescue practitioners (BRPs). The new deadline is now 1 May.
According to the department, Minister of Public Enterprises Pravin Gordhan convened a high-level meeting on Saturday with representatives of the business rescue practitioners of SAA, as well as the various unions and non-unionised staff.
Mashudu Raphetha, president of the National Transport Movement (NTM) said in an update to his members after the meeting that Gordhan reiterated that SAA is bloated and that job losses were inevitable, but that it is upon the entire leadership of SAA to mitigate and minimise job losses.
“It is NTM’s conviction and view that all parties should work together to save the airline instead of political grandstanding,” said Raphetha, adding that they were informed that the aim is still to publish the “much anticipated” business rescue plan at the end of May.
According to Raphetha, the BRPs are set to meet with Gordhan “to consider the gravity and risk of further extensions of the much required funding for the restructuring process of SAA”.
According to the DPE, an agreement in principle was reached at the meeting to establish what it calls “a groundbreaking leadership compact…aimed at building new, fundamentally different cooperative relationships based on a spirit of strategic partnerships”.
“The leadership recognise the enormity of the challenge but are unequivocally committed to saving SAA and shining the torch to a new world post Covid-19 in which SAA is a key catalyst for investment and job creation,” states the DPE.
“The vision (for SAA) agreed by the parties is ‘a national asset which is internationally competitive, viable, sustainable and profitable’.”
On 9 March the BRPs started the section 189 process with employees on restructuring the company. About a week ago the BRPs offered all SAA employees (excluding Mango and SAA Technical staff, subsidiaries which are not in business rescue) severance packages at the end of April.
Up to and including April, the BRPs have paid all employees their full salaries. They have, however, indicated that, since the DPE has declined any further funding, there will not be enough money to continue beyond the end of the month.
This comes after government has repeatedly bailed out the airline over the years, often at the very last minute.
“The agreement seeks to provide the employees with the opportunity of concluding a mutually agreed separation of employment,” the Department of Public Enterprises (PDE) states in the document, dated Saturday.
Fin24 reported on Friday that the National Union of Metalworkers of South Africa and the SA Cabin Crew Association, which together form a majority of union representation at the embattled state-owned airline, are considering a court application to have the BRPs removed.
The SAA Pilots’ Association (SAAPA) also indicated that it would consider such a step.
NTM has already rejected the current proposal of the BRPs, “because it suggests the payment of severance packages are subject to the sale of certain assets and approval by creditors”.
The South African Federation of Trade Unions (Saftu) also indicated earlier on Friday that it “rejects with contempt” the BRPs’ proposal. It regards the proposal as an “attempt to blackmail workers”.
Saftu claims the aim is “to collapse SAA in order to open the way for its privatisation”.
A week ago the DPE rejected a request for further funding of about R10 billion from the BRPs in order to complete the business rescue process.
SAAPA is of the view that the entire section 189 process has been just “a box-ticking excercise from the beginning”. SAAPA claims labour has not been consulted to their satisfaction nor had informnation requested been provided, such as the business plans the BRPs referred to along the way.
Rising ‘from the ashes of SAA’
Earlier on Friday, in a public address about Covid-19 funding, Minister of Finance Tito Mboweni spoke of a “new economy” that could emerge after the lockdown ends. He said there will be new opportunities for companies to grow. Referenciing Gordhan, Mboweni said a new airline could arise from “the ashes of SAA”.
Numsa and Sacca accuse the BRPS of having “an agenda to strip the assets of the airline” and to liquidate it.
The DPE has said in the past that all parties need to commit to a creative solution to avoid the business rescue process, which started in December last year, from failing.
NTM says it is seeking clarity from the DPE as to the options government can offer SAA employees.
The union Solidarity has also expressed the need to obtain more clarity on the role and function of the so-called “Leadership Compact” proposed at the meeting with the DPE in lieu of the business rescue process.
“Not only are thousands of our members’ and their families’ livelihoods at stake, but also the entire airline industry and the economy of SA,” Solidarity said in a letter to the DPE.
In the view of the BRPs a structured winding down process would obtain a better option for employees and creditors than a mere liquidation.
“At this juncture, we wish to register our grave concern and disappointment that, despite substantial cash injection amounts that have been dedicated to the business rescue process, no plan has been forthcoming,” says Solidarity.
* This article will be updated as more information is obtained.