Funding of SAA retrenchment packages still up in the air

Trade unions representing a majority of SAA workers have endorsed a proposal by the business rescue practitioners to cut most of the airline’s workforce, which will pave the way for a new and smaller state-owned airline to be launched. SAA has a total workforce of 4,708.

The proposed job cuts and retrenchment packages are contained in an updated business rescue plan drafted by the SAA rescue practitioners, Siviwe Dongwana and Les Matuson, and released on Wednesday 8 July.

The proposed job cuts that have been accepted by trade unions are a milestone for the delayed SAA business rescue proceedings, which are now running for seven months. Ideally, such proceedings shouldn’t run for more than three months, according to the Companies Act, which governs business rescue proceedings in SA.

But crucial details about how the R2.2-billion in retrenchment packages for SAA workers will be funded still hang in the air. The National Treasury has drawn a line in the sand on further taxpayer-funded bailouts for SAA, which have amounted to roughly R57-billion since 1994.

The Treasury said last week in Parliament that there will be no more bailouts for SAA and the airline should be closed. This puts Dongwana and Matuson in an awkward position because the rescue plan’s approval by SAA creditors depends on whether further funding from the Treasury for the airline can be secured.

Approval by creditors

A crucial meeting of SAA creditors to either approve or reject the rescue plan will be held on 14 July. One of the necessary conditions for the approval of the rescue plan by creditors is that Dongwana and Matuson should get a firm commitment from the Treasury and the Department of Public Enterprises by 13 July on whether they are willing to fund SAA.

The rescue plan proposes that the government provides SAA with R10.3-billion in new money to fund the restart of its aviation operations and pay creditors, whose debt is not guaranteed by the government, including aircraft lessors. This money will also pay the R2.2-billion retrenchment packages that trade unions have secured for workers.

The hard stance by the Treasury, which is under pressure to cut government spending, is set to pit it against Public Enterprises Minister Pravin Gordhan. He has endorsed the rescue plan and wants SAA to be rescued, without saying how funding will be secured to launch a restructured airline by January 2021.

Gordhan’s department said in a statement on Wednesday: “In supporting the [rescue] plan, the government is committed to mobilise the necessary resources to fund the transition [of SAA].”

For now, Gordhan has convinced trade unions on restructuring SAA.

The National Union of Metalworkers of SA and the SA Cabin Crew Association are the latest trade unions to accept the terms of the severance package offered after talks this week with the department of public enterprises. The SAA Pilots’ Association said it has no objections to SAA or the department offering its members severance packages.

The three unions, which in coalition represent about 58% of SAA workers, had a sharp difference in opinion on how SAA should be restructured, saying labour was being unfairly targeted by Dongwana and Matuson through job cuts.

However, after talks with the department, the unions have told their members (SAA workers) to consider accepting the severance packages, which include, among other things, one week’s pay for every year worked at SAA, one month’s notice pay, compensation for accumulated leave, and a 13th cheque to affected workers.

In talks with the department, retrenchment packages offered to workers were sweetened. The initial rescue plan proposed cutting SAA jobs from 4,708 to 1,000.



But the rescue practitioners, Gordhan, and trade unions have agreed that an additional 1,000 workers won’t be retrenched but retained through a temporary layoff scheme by the Department of Employment and Labour. In terms of the offer (see table above), workers will get payments starting at around R350,000. Pilots will be the highest-paid and receive a package of R1.96-million while cabin crew workers will receive R350,000. DM/BM