SAA endgame arrives as Covid-19 hits airlines

Employees at embattled state-owned national carrier South African Airways (SAA) will know by the end of this month whether they will join the unemployment queue.

The airline’s business-rescue practitioners, Les Matuson and Siviwe Dongwana, informed employees on Thursday that the funds that have been disbursed to the airline by government and private lenders are likely to run out by March 31. As a result, consultations with workers — in line with the Section 189 notice issued earlier this month — will be concluded by the end of the month. 

The company’s revenue projections have been negatively affected by the restrictions on travel that have been placed by various governments around the world, including South Africa. At the time of issuance of the Section 189 notice, the airline had anticipated that it would still be generating significant revenue from ticket sales. 

These projections have now been adjusted as a result of the outbreak of the coronavirus. 

The letter to employees said: “The revenue and cash-flow forecasts were prepared on a basis of higher load factors . It now appears that the post-commencement financing may be exhausted much earlier than anticipated.”

In January, the Development Bank of South Africa provided a R3.5-billion loan to the company. This was on top of the R2-billion in post-commencement funding loaned to SAA by private creditors in December, shortly after it was placed under business rescue.

As part of cash-conservation measures in the face of Covid-19, the rescue practitioners have proposed that from March 22 (Sunday), a rotational lay-off scheme be implemented. This would see non-essential employees working on part time basis at the airline. These employees would work for SAA every second week. For the services that they have rendered to the airline during that time, workers will receive only 66% of their monthly salaries “with the other 34% being accrued, but not paid as and when it becomes due in terms of the contracts of employment”. 

During the week that employees are not working, they will not receive their salaries, but the airline will still contribute to their medical and retirement funds. 

If this measure is rejected by the unions, the rescue practitioners have proposed employees work only three times a week from March 22. In this proposal, workers would receive their salaries for only the days that they have worked.

Whether the unions will agree to the proposals will only be communicated at a later stage. Unions and the rescue practitioners were scheduled to meet on Friday, but the meeting had to be postponed due to the Commission for Conciliation, Mediation and Arbitration (CCMA) postponing all matters set down to be heard between March 18 and April 14. 

As the airline burns through its cash reserves following the outbreak of the novel coronavirus, the rescue practitioners have also proposed that the Section 189 process be sped up for the airline to save costs. 

Earlier this month, the rescue practitioners proposed that consultation be concluded by April 8 in order to avoid SAA being liquidated. Matuson and Dongwana have brought this deadline closer and have now proposed that the consultation be concluded by March 31, the same day on which the business rescue plan is scheduled to be finalised. 

Employees would then receive their notices of termination by that date. 

“We believe that these proposals are pivotal to avoiding liquidation,” the letter reads. 

On Friday, SAA announced that it would  suspend all international operations until May 31 in response to a government travel ban. The airline’s domestic routes will, however, continue to operate. 

“The increasing risks to our crew of contracting the virus, including the possibility of being trapped in foreign destinations, as a consequence of increasing travel bans cannot be ignored,” said SAA acting chief executive, Zuks Ramasia.

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Thando Maeko
Thando Maeko is an Adamela Trust business reporter at the Mail & Guardian

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