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South Africa Airways (SAA) does not have enough money to cover a significant portion of its salary bill beyond the end of the month, its business rescue professionals (BRP) say.
They have emphasized the need for employees to take severance packages or see the airline wind up.
In a letter sent to creditors and workers on Thursday, BRP Les Matuson and Siviwe Dongwana say that due to lack of funds from the shareholder, which is the government, represented by the Minister of Public Companies, to allow the rescue process and airline restructuring, they have been left with two options:
- Avoid liquidation through a liquidation process that involves reaching an agreement with all unions to terminate employment contracts and offer severance packages that would be financed by the sale of selected assets. This would allow business rescue professionals to develop and publish a rescue plan.
- Alternatively, if they cannot reach a mass employment termination agreement, BRPs will submit an urgent request to discontinue the rescue process and liquidate the airline.
Unions and non-union representatives received the collective agreement last Friday (April 17) and were given until this Friday to accept it. The agreement states that all employee contracts for more than 4,700 workers will end in late April and the severance packages in question could be paid in whole or in part after an asset sale for six to 24 months.
Matuson and Dongwana said the two scenarios would be the most responsible way to halt the airline’s operations.
Read:
SAA with liquidity problems proposes termination of employee contracts
Unions respond to SAA severance package offer
BRPs said government requests to finance immediate payment of compensation packages were unsuccessful.
The company, which has been in commercial bailout since December, has gone through R5.5 billion of state-guaranteed post-start funds.
In February, the National Treasury extended another R16.4 billion to cover the debts and guarantees of the government. He did not mention the money for the airline’s restructuring, which cost R7.7 billion and which the government had agreed to.
Read: SAA Technical asks workers to “sacrifice” half of their wages
In April, the state told Matuson and Dongwana that it could not grant them the R10 billion financing, saying that the government no longer had room to finance the airline.
Although the country has been under blockade, the airline has been able to continue with limited operations through the repatriation of foreign citizens to their respective countries. These flights will end at the end of the month.
“The lock remains in place and SAA has no funds to continue negotiating and cannot pay a significant portion of the wage bill beyond April 2020,” said BRPs.
