SAA rescuers give affected parties two options: Wind down or liquidate

The ongoing impasse between the department of public enterprises and SAA’s business-rescue practitioners shifted into overdrive on Thursday evening when the rescue practitioners issued a notice that the airline is left with only one option — a shutdown. 

With the government standing firm this week in its assertion there will be no further cash given to the airline, joint SAA business-rescue practitioners Les Matuson and Siviwe Dongwana have informed the affected parties — comprising labour, creditors and other stakeholders — that the only remaining options are either the company winds down by terminating employees with an agreement, or they apply to the courts to discontinue business rescue and place the airline into liquidation. 

“The practitioners have presented a collective agreement to all unions and representatives of non-unionised employees of SAA on April 17 2020, for consideration and negotiation, and have advised that agreement must be reached by April 24 2020. This agreement seeks to provide the employees with the opportunity of concluding a mutually agreed separation of employment,” the notice said. 

The rescue practitioners also shared a slide presentation showing the difference, in terms of severance pay for employees,  between the two approaches, showing that employees stood to receive less if the company went into liquidation without them signing a severance agreement with SAA. 

SAA spokesperson Tlali Tlali said earlier on Thursday that the implementation of travel bans, which has had a negative effect on aviation, has meant that employees at SAA Technical (Saat), Air Chefs and low-cost airline Mango would not receive their full salaries this month. 

Tlali said the airline had already submitted an application for a top up from the Unemployment Insurance Fund’s Temporary Employee Relief Scheme for businesses in distress, and was awaiting a response. 

“The implementation of the Covid-19 lockdown and attendant travel restrictions have had [a] serious negative impact on the industry and SAA Group was not spared. While SAA [the airline] will be able to pay salaries to all employees on April 24, other subsidiaries across the group have experienced [an] impact of an immediate nature in relation to [the] payment of salaries to their employees,” Tlali said.

“After discussions with employee unions, management at Saat intends to release a communication to staff today to notify employees about the position of the company in relation to the payment of April salaries.” 

Saat will communicate that:

  • Workers will receive 50% of net pay, with 100% contribution to pension, medical aid and other third parties; 
  • The remaining 50% will be paid as soon as Saat has sufficient cash to meet this obligation, while ensuring that Saat is able to maintain its South African Civil Aviation authority part 145 compliance by having sufficient materials available to maintain customer aircraft; and
  •  Essential-services employees who continue to come to work will receive a non-precedent-setting gratuity allowance, which will be deducted from the outstanding 50% when it is paid to employees.   

“We remain committed to advising key stakeholders of any material changes in the business, including the financial performance of the airline,” Tlali added.

Leaked communication from inside the maintenance and repair organisation earlier showed that the government’s rejection of a plea for a cash injection has affected Saat’s ability to pay full salaries to its 2 319 workers for the month of April.

The letter, which was issued on Wednesday, says the effect of travel bans has affected Saat’s ability to generate revenue. 

“In the communiqué issued to employees on April 15 2020, management shared measures that were put in place to secure funding and relief for Saat … The current financial situation faced by Saat continue[s] to be dire. Saat has not managed to secure additional funding from the shareholder, except [for] payment of the work that Saat managed to do over this lockdown period,” it said.

Saat is one of the subsidiaries earmarked for sale by as part of the department of public enterprises, the government’s shareholder representative for SAA, to raise some of the funding required to save the airline. 

“It is not business as usual for the entire aviation industry and the same applies to many other businesses, particularly in the aviation industry. All employees are encouraged to understand this dire situation facing the business,” the letter said.

“Employees delivering essential services are encouraged to continue with that. Any work disruptions [of] the current limited operations will further worsen the already dire situation, and will likely put the business [at] a point of no return, where the Saat may end up collapsing.”

As the communiqué was circulating at Airways Park, labour unions were in caucus meetings with the Commission for Conciliation, Mediation and Arbitration to work through the proposed retrenchment of 2 200 employees, which was initiated by the airline’s business-rescue practitioners.

Labour this week also met with Department of Public Enterprises Minister Pravin Gordhan, Labour Minister Thulas Nxesi, and Tourism Minister Mmamoloko Kubayi-Ngubane. Discussions — which took place through video-conferencing — centred on a new airline that would emerge from the business-rescue process. 

According to the department of public enterprises, the meeting agreed that a consultative forum would be established for dialogue and consultation on the way ahead, and that to arrive at a solution for SAA, some jobs would be lost and the remaining employees would need to sacrifice some of the unaffordable arrangements. “It was agreed that social plans will be developed to cushion the effect of losing jobs on the affected employees.

“The IMC [interministerial committee] reiterated the reality that the government is not in a position to provide more capital to SAA, and that all parties need to commit to a creative solution for SAA to avoid a scenario where the business rescue is deemed to have failed,” said the department. 

This view was contradicted by the National Union of Metalworkers of South Africa (Numsa), and the South African Cabin Crew Association (Sacca), who, in their own statement, said what had been discussed at the meeting was forming a consulting forum and a draft agreement of social compact to guide this process. 

“In our contribution as Numsa and Sacca and in our recollection of the contribution of other unions, it was clear that national fiscus would continue to play a role in making sure that we secure the future of the airline,” they said. 

Gordhan was also to present a report to Cabinet on the state of SAA finances and how this will affect the airline’s future prospects. 

On Thursday Louise Brugman, spokesperson for Matuson and Dongwana, said they were still expecting to be briefed by the department of public enterprises on the outcomes of the meeting. 

SAA’s ability to survive was cast in doubt last week when Matuson and Dongwana informed staff, through another memo that was leaked, that the government had rejected their plea for a R10-billion cash injection to see through SAA’s restructuring and mitigate losses precipitated by travel bans in response to the rapid spread of Covid-19. 

By last Friday the rescue practitioners had issued a proposed collective-settlement agreement to seven unions and representatives of non-unionised workers, through which they would receive full salaries, one month’s notice payment, leave accrued, plus one week’s salary for every year of service. Employees entitled to a 13th cheque would also be paid out for this. 

The offer stipulated that this was all based on SAA’s ability to dispose of some of its assets, including property, spares and inventory, as well as trade debt, all of which would be realised in between six and 24 months. 

In response, the National Transport Movement (NTM), the Numsa and the Sacca proposed initiatives and cost-cutting measures that could mitigate job losses and put more money in the pockets of workers who would be retrenched. 

Broadly, these included the granting of early retirement to all employees over 55 years old with an added incentive, insourcing of services for which the airline was paying outside companies, and terminating inefficient and unnecessary contracts.

Gordhan’s spokesperson, Sam Mkokeli, did not reply to the Mail & Guardian’s request for comment by the time of publication. 

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Sabelo Skiti

Sabelo Skiti is an investigative journalist.

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