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Seven unions representing SAA workers want rescue professionals to consider other options in addition to the massive cuts. (Photo: Flickr / Burmarrad Camenzuli)
Business rescue professionals, government, and unions have conflicting ideas about how to rescue SAA. This is prolonging the commercial rescue procedures, which have been ongoing for five months. According to the Companies Law, these procedures should ideally last three months.
The agreement between the government and corporate rescue professionals not to liquidate SAA (for now) and delay the downsizing of some 5,000 workers is another attempt to eliminate the possible collapse of the airline.
The agreement between the two parties, which was announced by the government over the weekend, will extend the commercial rescue procedures that have been in progress for five months and have not yet produced a firm decision on the fate of SAA.
After realizing that the more than R20 billion in successive government bailouts awarded to SAA in the past six years were unable to keep the airline afloat because it was bankrupt, the Department of Public Enterprises (DPE) placed SAA under commercial bailout On December 5, 2019, the DPE oversees the airline’s operations as the sole shareholder.
According to the Companies Law, which governs the rescue procedures for companies in SA, these procedures should ideally last three months. And based on this score, SAA’s commercial rescue procedures should have been completed in February or March 2020 by designated rescue practitioners, Les Matuson and Siviwe Dongwana.
Over the past five months, Matuson and Dongwana have done their job by convening meetings on how to restructure the airline with affected parties, including SAA creditors who are owed more than R6 billion (short and long-term debt). , government, trade unions and representatives of non-union workers.
SAA has 9,800 group-level workers, including subsidiaries SAA Technical (aircraft maintenance), Air Chefs (catering) and SAA Cargo (air cargo movement), according to rescue professionals. But the rescue professional’s restructuring discussions have focused on the future of workers at an SAA operational level (excluding subsidiaries), which has 5,120 workers.
No money for commercial rescue procedures
The fact that the rescue procedures continue for five months means that Matuson and Dongwana are required by the Companies Act to produce regular reports to the affected parties on the progress of the rescue procedures and to outline proposals to restructure the airline.
Matuson and Dongwana’s proposals on how to restructure SAA have brought the duo on a collision course with the government and unions, who have conflicting ideas on how to rescue the airline, delaying rescue procedures in the process.
As the big difference in opinion on how to restructure SAA increases, Matuson and Dongwana have no money to finance the next phase of the trade bailout process beyond April. The R5.5 billion (R2 billion borrowed from a consortium of commercial banks and R3.5 billion from the South African Development Bank) that Matuson and Dongwana received in two tranches (in December 2019 and February 2020) To finance business, the rescue procedures were exhausted at the end of February.
At the time, Matuson and Dongwana expected the rescue procedures to be financed by SAA revenues generated from the sale of tickets. This plan was thwarted by travel restrictions imposed by President Cyril Ramaphosa on March 18 to contain the spread of Covid-19, prompting SAA to suspend all national, regional and international flights.
Matuson and Dongwana’s next step was to ask the government for additional funds of between R7.7 billion and R10 billion, which was rejected. Without funding, the continuation and funding of rescue procedures beyond April seems bleak.
Job cuts
Matuson and Dongwana have now moved to reduce employment costs by offering almost all of SAA’s downsizing packages that include one month’s salary, one week’s pay for each year of service on the airline, the payment of annual vacations not taken and a check number 13 if they are entitled. to one. The deadline to accept the reduction package offer was April 24 and the workers would terminate their employment by mutual agreement on April 30.
Proceeds from the sale of SAA assets, such as properties (including buildings such as the Gauteng Airway Park and Freight Office and others located in Cape Town, Port Elizabeth and East London) and parts of aircraft (such as commuter trains landing, motors and digital devices). flight data recorders) would finance the payment of downsizing packages.
Payment of packages to workers depends on whether Matuson and Dongwana can find buyers for SAA assets in the next six to 12 months.
Matuson and Dongwana have implored workers to accept the reduction of packaged personnel under a measured liquidation of SAA’s operations rather than when the airline is liquidated, leading to the death of SAA because its operations would be permanently closed and all workers they would lose their jobs (9,800 workers at a group level). Matuson and Dongwana are empowered by the Companies Act to apply for SAA liquidation in court if they believe the airline does not have a reasonable prospect of success.
A liquidation allows a company to cease some of its operations with minimal impact on workers. In this process, SAA workers’ payment claims (downsizing packages) would be placed ahead of other creditors such as commercial banks and vice versa during a liquidation.
See the classification of workers in a liquidation versus liquidation below:
A final trade bailout plan is expected to be released on May 29.
Pravin Gordhan intervenes
Public Business Minister Pravin Gordhan entered the SAA scuffle on Saturday, April 25 after a meeting with unions and non-union worker representatives, saying that company rescue professionals agreed to extend the deadline for workers accept reduction packages until May 1 instead of initial April 24.
In other words, the reductions have been delayed to give SAA workers more time to consider the reduction package offered by rescue practitioners. Gordhan also said the rescue practitioners had pledged not to consider the SAA liquidation.
A Johannesburg-based lawyer said that while rescue professionals are empowered to make decisions about SAA’s operational matters under the Companies Act, they still require the permission of Gordhan or the executive authority on the airline’s fundamental decisions. This is because SAA is a taxpayer-financed entity, which is governed by the Companies Law and the Public Finance Management Law (PFMA).
“In some cases, the PFMA overshadows the Companies Act, requiring Gordhan to approve the decisions made by business rescue professionals,” said the attorney.
Gordhan’s idea of restructuring SAA is at odds with the cost reduction plan offered by rescue practitioners. Gordhan wants the government to establish “a new financially viable airline” at a time when the global airline industry is in crisis after governments imposed travel restrictions to curb the spread of the Covid-19 pandemic.
Covid-19 has affected even successfully managed airlines globally; Air Mauritius has requested a commercial rescue, Richard Branson’s Virgin Atlantic is seeking help from the UK government because it is on the verge of collapse, Etihad Airways from Abu Dhabi has laid off more than 200 employees and Emirates from Dubai has offered pilots and personnel from cabin crew. unpaid leave
Seven unions representing SAA workers want rescue professionals to consider other options in addition to the massive cuts.
To save jobs and cut costs at SAA, unions want pilots and cabin crew workers to downgrade to cheaper overnight accommodation, Mango Airlines (a subsidiary of SAA) take over domestic routes. SAA to eliminate duplication of flight routes and contract contracts to clean SAA’s fleet of aircraft. BM
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