South African Airways’ creditors have approved the state airline’s business rescue plan, bringing to an end a long seven-month process.
Business rescue practitioner Siviwe Dongwana told the meeting of creditors on Tuesday that 86% of them had voted in favour of the plan, which will see the airline dissolved to make way for a new airline.
The Companies Act requires more than 75% of creditors to approve a business rescue plan; failing to get this go-ahead would have led to the airline being liquidated.
Labour unions and staff representatives — with the exception of the SAA Pilots Association, which represents 600 members (13% of the total number of SAA employees) — have accepted the voluntary severance and retirement packages. The 2 700 people who will lose their jobs will get one week’s salary for every year worked plus a month’s pay.
The packages will cost the state R2.2-billion.
Another 1 000 SAA employees are expected to be retained for the new airline. They will be on a temporary/training lay-off scheme for 12 months.
Any former employee can be re-employed by the new airline that should emerge after the dissolution of SAA.
The rescue plan achieves the recovery projections over the next three years. Trade creditors will be paid 7.5c for each rand they are owed, over the same period.
The government has committed R10.4-billion to the rescue plan. This is in addition to the R1.4-billion it has already promised. Dongwana said the government’s letter of commitment is expected by July 15.
The R10.4-billion is to be used for the payment of operations, severance packages, aircraft lease cancellations, paying off SAA’s debt after it was placed under business rescue in December and reimbursing SAA ticket holders for forward booked flights.
The acting director general of the department of public enterprises, Kgathatso Tlhakudi, denied that rescuing the airline was a “vanity project of the government”, saying the decision was in line with the government’s plans for improving the economy and “in the interests of all South Africans”.
“The restructuring that is being proposed for SAA is fundamental and will create a solid base for the emergence of a competitive, viable and sustainable national airline,” he told the creditors.
Tlhakudi added that the new airline will be a national asset that is likely to attract private equity partners. A transactional adviser has been appointed by the government to “pair up” with the potential equity partners.
The new airline’s board members will be announced soon. In the meantime, the current chief operations officer, Philip Saunders, will be the interim chief executive. Vuyani Jarana resigned in June last year, and acting chief executive Zuks Ramasia went on early retirement in April.
“The DPE [department of public enterprises] believes that the favourable vote is a much better outcome for creditors and SAA employees than liquidation, and the government remains confident that the implementation of the business rescue plan will balance the rights and interests of all parties,” it said in a statement.