Government kicks SAA’s fate in the future

A SAA plane at OR Tambo International Airport on February 18, 2020. (Photo: Gallo Images / Jacques Stander)

SAA does not appear to be a priority for a government concerned about the economic consequences of the Covid-19 pandemic. SAA’s future ownership model remains unknown: whether the government will retain it as a national airline or whether it will cut ties with it by finding strategic capital partners.

A crucial meeting between the government and workers on Tuesday, April 21 about the fate of SAA ended without making firm decisions on how the struggling state airline will be restructured or whether it will be retained as a national airline.

Instead, it appears that the government is making key decisions about the future of SAA in the future to focus on containing the economic consequences of the Covid-19 pandemic.

Another immediate priority for the government is also responding to social unrest and recent cases of crime in communities under stress due to the prolonged five-week blockade.

In another possible indication that state-owned companies are not a priority for the government, President Cyril Ramaphosa did not mention the SAA in his evening address to the nation on Tuesday, when he announced, among other things, a R500,000 economic support package. millions to cushion the hit of Covid-19 in the national economy.

Ramaphosa was feeding back the decisions made by the five Cabinet groups, which met on April 15 and April 20, regarding urgent economic and fiscal interventions to the Covid-19 crisis. But public company issues did not appear to appear at both cabinet meetings.

Unions meet with government

Instead, Ramaphosa asked Public Business Minister Pravin Gordhan to prepare a report on the airline’s future, which was discussed at a separate meeting of the Inter-Ministerial Committee (WCC) on Tuesday with unions representing workers at SAA.

Crucially, SAA commercial rescue practitioners Les Matuson and Siviwe Dongwana were not part of the meeting even though they are tasked with saving the airline from collapse.

The WCC meeting was made up of Gordhan, the Minister of Labor and Employment, Thulas Nxesi, and the Minister of Tourism, Mmamoloko Kubayi-Ngubane. Unions in attendance at the meeting include the South African Transport and Allied Workers Union, the South African National Metalworkers Union, the South African Airways Pilots Association, the National Transport Movement, the Aviation Union of the South Africa and the South African Cabin Crew Association.

After the meeting, the public business department said in a statement that it was still committed to SAA’s commercial bailout process, even though it has denied the bankruptcy airline a new taxpayer-funded bailout of R10 billion. . This suggests that the department, which oversees SAA’s operations, still believes the airline has reasonable prospects for rescue and success.

Lacking funds for the commercial bailout process, SAA has been plunged into a terminal bust when faced with a crippling cash crisis, threatening the success of its restructuring.

The government and unions agreed that a “new economically viable and competitive airline” should emerge from the commercial bailout process.

But SAA’s future ownership model remains unknown; if the government will retain it as a national airline or if it will cut ties with the airline by finding strategic capital partners.

The public companies department told unions that it is not in a position to provide SAA with more capital, beyond the R20 billion in successive bailouts the airline has received in the last six years, while it recorded around R26 billion in financial losses during the same period

This is because public finances are limited and the government is about to embark on a major spending program to complete social welfare grants for poor households affected by the closure and guarantee loans from commercial banks to help companies in financial difficulties.

Job losses

The department threw the ball into union hands over the SAA bailout.

“The IMC reiterated the reality that the government is not in a position to provide more capital to SAA and that all parties must commit to a creative solution for SAA to avoid a scenario in which the trade bailout is deemed to have failed.

“SAA unions were invited to present their proposals on the restructuring of the national company and the future of jobs,” he said.

With no additional government funding, SAA’s corporate rescue professionals want to embark on a process to terminate the employment of all airline workers by the end of April 2020. SAA employs 8,997 workers.

Workers’ compensation packages would only be provided if rescue professionals can free up cash by selling SAA assets, such as property and parts of aircraft.

The unions seemed to have made peace with the prospect of job losses on the airline.

The department said:

“The unions agreed that upon reaching a solution for SAA, some jobs will be lost and that employees left behind will have to sacrifice some of the unaffordable arrangements that have worsened the airline’s financial position.”

“It was agreed that social plans will be developed to cushion the effect of losing jobs on affected employees,” he added. BM