South African Airways (SAA) has issued unions with a proposal to terminate employment contracts after the government turned down the latest request for funding for the airline’s business rescue practioners.
The “draft” collective agreement forwarded to both unions and the representatives of non-unionised employees states that SAA has reached a stage that the airline is un-salvageable by the business rescue process. Employees have been given until April 24 to confirm in writing that they accept the agreement, that is planned to to take effect as from 30 April 2020
On March 9 the airlines business rescue practitioners (BRPs) Les Matuson and Siviwe Dongwana issued notices to the eight recognised employee unions, as well as management to begin consultations that would affect all 4 708 employees based in South Africa reducing the number of workers to 2440, almost half.
SAA was placed under business rescue in December 2019 and since then the airline has gone through R5.5 billion in post-commencement funding of which R2 billion was raised from local banks and R3.5 billion from the Development Bank of Southern Africa all of which were fully guaranteed by Treasury.
Initially, the BRPs were scheduled to release the airlines restructuring plan in February but delays in government raising its share of the post-commencement funding led to them receiving an extension to the end of March. The Covid-19 pandemic, which further frustrated the process due to widespread groundings saw a further extension being granted to 29 May.
By the end of March it was becoming painfully clear that the R5.5 billion was by no way sufficient for the continuation of the airline or the BRP for that matter. The Business Rescue Practitioners approaching the Department of Public Enterprises for a further R10 billion funding. This request was summarily rejected by Minister Pravin Gordhan.
In a letter to creditors, Matuson and Dongwana said they would assess the “the impact of this development on the business rescue process and will communicate any decisions to be made in due course.”
The National Carrier has amassed R26 billion in losses in the past six years and received in excess R20 billion in government bailouts. The end of government bailouts appears to have sounded the final bell for the struggling airline, a move that many feel is long overdue. An official report on the airline’s future is expected on Monday.
Employees who agree to the termination will receive one week’s remuneration for every year of service, one month’s remuneration in place of notice pay, payment for outstanding leave and a pro-rated 13th cheque.
The airline will have to sell its assets in order to payout severance packages.
The assets listed for sale are:
Property, which may be realised within 6 to 12 months;
Rotables, which may be realised within 12 to 24 months; and
Trade debts, which may be collected between 6 to 12 months, depending on the financial position of the debtors.
“The payment of the severance packages as set out in the clause is conditional upon the assets set out… above being realised at the value capable to cover the severance packages,” the draft states
Should SAA not be able to cover the cost of the severance packages through a timely sale of assets the airline will pay the packages on a monthly basis over a period of six months once the sale has been concluded.
If the company does not raise enough money to cover the packages altogether, employees will either “receive a pro-rated portion of the severance package, proportionate to the value of the assets that may be realised” and they are can lodge a claim for any payments that are outstanding with the liquidators of the company.
This sorry state of affairs could not come at a worse time for the employees as the aviation world grapples with the most serious crisis ever experienced due to the mass groundings as a result of the coronavirus pandemic.