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The more than 4,700 South African Airways (SAA) employees face a great dilemma.
For this Friday afternoon, they have a choice between a termination agreement proposed by the state airline’s business rescue professionals, Les Matuson and Siviwe Dongwana, or whether to risk a “Leadership Pact” agreed in principle between the Minister of Public Companies Pravin Gordhan and unions at a meeting last Saturday.
The professionals’ compensation packages would be financed from the sale of some SAA assets. Given the current dismal state of the aviation industry due to the impact of the coronavirus pandemic (Covid-19), it is unclear how much could be generated. It is a process that can take up to 24 months to complete.
On the other hand, the agreement with Gordhan’s ministry provides for all parties to work together to establish a new airline, “a national asset that is internationally competitive, sustainable and profitable.” Of key consideration, saving jobs.
There’s even a hint that employees may end up owning a new airline. It is not yet clear where the funding for such a process would come from. Last week, Finance Minister Tito Mboweni spoke about a new airline “emerging from the ashes of SAA.”
What would be the legitimacy of such an imagined “leadership pact” and its decisions continue to be questioned, since the corporate rescue state has put power in the hands of the BRP.
Furthermore, they are obliged to act in the interest of all affected parties, including creditors, and not just employees.
The DPE recently rejected a request from the BRPs for additional funding of approximately R10 billion to complete the trade bailout process. This prompted BRPs to indicate that they currently do not have enough money to continue operating the airline after the end of April.
If the termination of your proposed employment contract is not accepted, corporate rescue professionals say their only other option would be to apply for liquidation.
All of this has left many employees confused and anxious about which option would put them in a better position, according to a senior SAA employee, who spoke to Fin24 on condition of anonymity.
“It appears that many individual employees, across a broad spectrum of the company, do not really understand their rights in the event their unions reject the BRP’s proposed termination of section 189 job,” the employee said.
“Without further government funding, they worry about their situation if they don’t sign the BRP proposal and find, in the liquidation case, that other creditors are in a much better position than they are.”
Unions weigh
The SA National Union of Metalworkers (Numsa) and the SA Cabin Crew Association (Sacca), which together form the largest union representation in SAA, reject the practitioners’ offer of downsizing.
Numsa spokesman Phakmile Hlubi-Majola says they view the proposal as “an empty and conditional package.” The union even questions the legality of the current section 189 process and claims it is putting employees under “duress” to accept.
Numsa and Sacca even threatened to go to court in an attempt to eliminate BRPs.
Captain Grant Back, president of the SAA Pilots Association (SAAPA), says they are interested in working with the DPE and other unions to find practical solutions to save the airline.
SAAPA has advised its members not to sign the downsizing agreement, but they say members are free to sign it as individuals if they so choose.
As for the National Transport Movement (NTM), its president, Mashudu Raphetha, urges members “not to act desperately and exercise patience.”
“We are looking for common ground. Eventually we believe SAA will not be liquidated, but better treatment for our members is our priority,” he said.
In the opinion of Werner Human, deputy general manager for legal affairs at Solidaridad, employees are much more certain under the Basic Conditions of Employment Act than under the mutual separation agreement proposed by professionals.
At the same time, the union is concerned that the process envisaged by Gordhan’s collective leadership pact may delay the trade bailout process, with time running out.
What the law says
The reasonable prospect of success with commercial rescue is the key question when BRPs must decide to keep a business running or if they should be liquidated, explains Gideon Slabbert, managing director and commercial rescue professional at Turnaround Rescue Solutions.
He says the challenge faced by SAA BRPs is not due to incompetence or poor decision making. By law, they are required to continually evaluate the reasonable prospects of the business.
“I think employees cannot make a decision based on what is presented unless they know what they are likely to receive, understand when the payments are and how much they will receive compared to whether the business is in liquidation,” he says. Slabbert
“They must understand how the income will be distributed to the court owner and liquidator, the VAT payable on all assets sold, how much money will be spent on secured lenders, and what will be left for employees.”
For Slabbert, it remains an open question whether, if there is not enough money from the assets sold, if the state will provide funds for the section 189 packages.
So whether SAA unions and individual employees opt for the professionals’ proposal or the undetermined leadership deal under Gordhan, one thing is for sure, time is running out.
