SAA rescue practitioners expedite reduction of airline’s bloated employee costs

The business rescue practitioners of SAA have told the troubled airline’s line managers to expedite the implementation of far-reaching initiatives to reduce bloated employee headcount costs.

In a letter to SAA line managers, the appointed rescue practitioners, Les Matuson and Siviwe Dongwana, have proposed cost-saving initiatives such as reducing the number of days that employees work in a month, placing employees on compulsory leave and terminating fixed-term contracts when they expire.

Underscoring that SAA’s employee costs are bloated is that during its 2017 financial year – the last time the state-owned airline published audited results – costs related to its then 10,071 employees at a group level were R6.1-billion compared with the R5.6-billion loss it recorded. The group-level includes SAA’s operations and those of its subsidiaries such as Mango Airlines (low-cost carrier also owned by the state), SAA Technical (aircraft maintenance), Air Chefs (catering), SAA Cargo (air freight movement) and the Voyager customer loyalty programme.

SAA has been operating on the basis of a reduced service since it was placed under voluntary business rescue on 4 December 2019, as Matuson and Dongwana have begun the work to cut the airline’s unprofitable domestic flight routes down to one, international routes to five and regional routes to 12.

In the letter to line managers. dated Tuesday 17 March 2020, which was obtained by Business Maverick, Matuson and Dongwana said the reduction of flight routes paves the way to “review and optimise” the airline’s “current shift patterns” in various departments “to make them more cost-efficient”. A spokesperson for the rescue practitioners said SAA’s reduced flight services makes it opportune for employees to take leave that is due to them.

One of the cost reductions options that Matuson and Dongwana have proposed is reducing the number of days SAA employees work, as they would voluntarily reduce their working time per month by “20% to 40%”. This translates to employees working three or four days a week.

Matuson and Dongwana said SAA carries a “huge liability in terms of leave”. To reduce this undisclosed liability, the duo want the line managers to develop a schedule to “release those employees that have positive balances on their statutory leave”.

“Secondly, to reduce the accumulated leave liability of SAA, you [line managers] are requested to introduce a voluntary compressed work week/month offer in your department where employees work three days and are on leave the other two days in a week, or work for four days and are on leave the one day in a week,” the letter reads.

The third option is the termination of fixed-term contracts when they expire. 

“Only in exceptional circumstances, and based on a compelling business rationale, which must be approved by the BRP [business rescue practitioners], will any fixed-term contract be extended.”

However, contracts extending beyond 31 March 2020 will be dealt with in terms of the Section 189 process under the Labour Relations Act, which sets out the steps and the consultations a company must follow during retrenchments. Matuson and Dongwana have given line managers a deadline of Wednesday 18 March to submit plans to reduce labour costs and commence with the implementation of the plans from Thursday 19 March.

Potential job losses

The rescue practitioners haven’t announced the number of potential job cuts at SAA, only saying (on 9 March) that it has begun the process of consultation with employees and trade unions.  They expect that all 4,708 employees, only at an SAA level excluding its subsidiaries, will be affected by potential job cuts. Including operations of SAA and those of its subsidiaries, the airline employs about 8,997 people.

https://www.dailymaverick.co.za/article/2020-03-05-the-plan-to-rescue-saa-from-collapse-takes-shape/

In their draft business rescue plan, which is not final, Matuson and Dongwana included four restructuring options and associated job losses. Among the options are liquidation (implying the end of SAA operations that will result in 8,997 job potential losses) and cutting flight routes and reducing SAA’s aircraft fleet (which will result in 5,800 potential job losses).  BM