/ 18 June 2020

Unions reject SAA severance pay

Saa Piolts 8626 Dv
Grounded: The SAA Pilots Association is studying the proposed rescue plan, but criticised it for being short on detail. (Delwyn Verasamy/M&G)

Severance packages offered to about 80% of SAA’s workforce could still be subject to change because the majority of labour unions are holding out for an improved offer.

The packages, which will cost the state a whopping R2.2-billion, mirror those offered by the struggling airline’s government shareholder, the department of public enterprises for their vision of a new SAA.

The workers to be retrenched have been offered one week’s pay for every year worked, two labour union leaders said on Wednesday.

The majority of unions, which did not make submissions to the business rescue practitioners, are preparing to take up the issue of the severance packages.

 “Eskom and other SOEs [state-owned entities] get an offer of two weeks per year. Why should SAA be any different? They expect 78 percent of the workforce to voluntarily walk out the door with no right to return for one week served in today’s economic climate after the DPE [department of public enterprises] has taken SAA to the brink,” said one union leader.

This sentiment was echoed by the leader of another union, who added that the offer had caused tension even among the leadership compact forum — which is made up of the public enterprises department, all unions and the business rescue practitioners — brought together by the department.

It does not seem as though this new dissent will have any effect on the rescue plan being approved because labour — union and nonunion — is speculated to account for about 30% of the total votes.

Should the rescue plan fail to get sufficient support, the airline will automatically go into liquidation.

The South African Cabin Crew Association and the National Union of Metalworkers of South African could not be reached for comment this week, while the SAA Pilots Association chairperson, Grant Back, said: “We are studying the plan, which has many inconsistencies and lacks detail on many important issues that we will need to assess.”

According to business rescue practitioners Les Matuson and Siviwe Dongwana, only one union, the National Transport Movement (NTM), had submitted proposals and queries.

In fact, the rescue practitioners’ report says the unions had written to them on June 2 to inform them that they would not consult through the established employees committee but rather through the leadership forum.

NTM president Mashudu Raphetha said his union supported the rescue plan.

Earlier this week the Mail & Guardian reported that the government, through the leadership forum, was still working on its plan for a new airline, which is built around a phased operations model and would require R1.5-billion for the severance packages of 2 400 SAA employees.

The final business rescue plan, which was published a day past deadline, proposes the airline be restructured in a different mould to this and provides greater detail about the cost structure.

Should SAA fail to attract a strategic equity partner, the government would have to provide an extra R10-billion — on top of R16.4-billion already appropriated to cover government guaranteed debt — to get the plan off the ground.

The business rescue practitioners said they hoped to continue talks with three parties who had been interested in taking up equity in SAA prior to the lockdown, which has made worse the state airline’s financial woes.

On top of some R27-billion in accumulated losses incurred between 2012 and 2019, the airline is forecast to lose more than R6-billion in the next three financial years.

Of the extra R10-billion, R2-billion is intended for initial operations, R2.2-billion for severance packages for 3 622 employees and R1.7-billion will go towards aircraft lease cancellations. The balance would be split between debt incurred after SAA was placed in business rescue and reimbursing SAA ticket holders for forward booked flights.

 The new plan also proposes that, until February 2021, SAA operates only six aircraft — flying from OR Tambo International Airport to Cape Town, Durban and Port Elizabeth — and working its way up to 26 aircraft by December next year.

This fleet will service a route network that has been reduced by a little under 20%, comprising five international destinations, 19 regional and three domestic.

Staff headcount would be reduced from 4 708 employees to 1 000 at the start, but these numbers could increase depending on the airline’s performance.

The plan also laid bare the state of deterioration of SAA’s subsidiaries —SAA Technical, Mango and catering Air Chefs — mainly as a result of the ban on travel but also by SAA going in business rescue. The three companies require a R2.1-billion cash injection for working capital and restructuring costs. SAA Technical and Mango need R1-billion each and Air Chefs requires an amount of R150-million.

Though it welcomed and supported the plan, the public enterprises department’s press statement, issued on the same evening the plan was published, said it was still unhappy with some elements of the plan at first reading.

“Through government guarantees, the BRPs [business rescue practitioners] have had significant financial resources at their disposal to enable them to restructure SAA by stemming the tide of wastage, an excessive cost structure and cash burn. We will assess the plan, which we are concerned might not have been adequately accomplished,” the statement read.

“As the shareholder of SAA, government, taking into account the broader national interests, has made it clear that the desired outcome should be to establish a viable, sustainable national carrier that must emerge from the business rescue process. Particularly so, as government is expected to marshal the resources necessary for this process from diverse sources.”

On Thursday evening the leadership compact forum was still in discussion on the latest severance offer put forward by government.