OPINION: Can a dead airline ever fly?

Norman McFarlane

The figures seem to vary, depending upon who you speak to, but it looks like 2 700 SAA employees are likely to be retrenched, and 1 000 are likely to retain their jobs, once the Section 189 process currently under way at the national carrier, has played out.

It’s taken seemingly forever to get to this point, with the way forward lurching between liquidation and restructuring for well over a year, depending upon which party had won a court action to stop the other from proceeding with its agenda.

Accusations of malfeasance, subversive agendas, chicanery and dishonesty have abounded as the protagonists have fought titanic battles for the upper hand in this sad war to save a public enterprise that has made a significant contribution to the parlous state of the public purse.

The business rescue plan, recently implemented after 86% of creditors voted in favour of it, acknowledges that the carrier has accrued losses of
R23 billion in the last five years, having last made a profit in 2011.

It also notes that government, as the sole shareholder, is sole guarantor for the R16.4 billion owed to lenders and that said guarantees are irrevocable.

Aside from the R16.4 billion owed to lenders, it is estimated that SAA owes other creditors a further R23 billion, which, in the event of liquidation, would become due and payable, but with no money in the bank, those creditors would receive zero cents in the rand.

Employees would be entitled R32 000 each, but only if funds become available as the result of liquidation of the carrier’s remaining assets, and only after preferential creditors have been paid.

The business rescue plan staves off government having to stump up the R16.4 billion in guarantees, and allocates 7.5 cents in the rand, payable to concurrent creditors, over the next three years.

The 2 700 employees facing retrenchment will be entitled to guaranteed settlements in keeping with the provisions of the Labour Relations Act.

Clearly, it is in the interests of all stakeholders that the business rescue plan be implemented, in an attempt to save the ailing carrier, despite the bleak prospects confronting the aviation sector as a consequence of the coronavirus pandemic.

But business rescue comes at a price, to whit R10 billion, which, despite its repeated assertions that the cupboard is bare, must be forthcoming from government, in other words, from the taxpayer, because nobody in their right mind would advance SAA another red cent.

And, for the record, the probability of a strategic equity partner taking the permitted minority stake of 20% is more like a remote possibility, which would do little to ease the position in which SAA finds itself.

But did it need to get as bad as this? Not according to the business rescue plan, which places a great deal of the blame at the door of the unions, who, instead of accepting the writing that everybody else could see on the wall – that SAA had to shed most of its staff and cut unprofitable routes – stubbornly held out for maintaining the status quo.

The industrial action in November started the final collapse of the carrier, with travel insurers withdrawing cover for SAA tickets, travel agents refusing to book their clients on SAA flights, which in turn eroded what public trust remained.

Despite a brief rally over the festive season when desperate travellers would take any ticket they could lay their hands on, by the time President Ramaphosa put the country into lockdown, the company was no longer able to trade, and liquidation seemed the only option, the very outcome that the unions had been trying to stave off by their intransigence.

As recently as March 9, it was envisaged that 2 440 jobs could be saved but the unions (specifically NUMSA and SACCA) instituted court action on April 30 to stop the proposed change in the Section 189 process to negotiating voluntary severance packages instead of pursuing a headcount reduction.

Despite the R10 billion stumped up by government, there is no guarantee that the business rescue plan will work, that SAA will be saved, or that the 1 000 jobs will be saved long term, which begs the question: is the juice worth the squeeze?

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