Unions reject liquidation of South African Airways

The crisis facing South African Airways today is due to the failure of the state to fulfill the collective agreements on how to rescue the state company, unions allege

April 22, 2020 by Pavan Kulkarni
NUMSA member with a sign "Save our State Owned Enterprises"

The already weakened South African Airways (SAA) is nearing a point of collapse. According to the National Union of Metalworkers of South Africa (NUMSA) who met with the Department of Public Enterprises (DPE) yesterday, the government has shown no commitment to intervene and rescue the company.

The meeting between the department and the unions in SAA was convened after the latter rejected the proposal by SAA’s Business Rescue Practitioners (BRPs) to lay off almost all of its 4,700 employees by the end of this month.

Those agreeing to this proposal are promised a retrenchment package of a month’s wage in form of notice pay, in addition to payments for outstanding leaves and a week’s pay for each year employees were with the company.

The BRP’s plan after the mass layoffs is to limit the airline’s operation to cargo service and evacuation of South Africans stranded in other countries amidst the global travel bans and lockdowns to contain the COVID-19 pandemic.

This proposal was made by the BRPs after the DPE turned down their request for an additional R10 billion in funds to save the SAA from a collapse. However, the agenda to privatize the SAA by selling out its assets has been on the table since long before the government rejected the request for additional funds.

NUMSA and South African Cabin Crew Association (SACCA) have not only rejected the retrenchment package, but have also strongly opposed the plan to sell out this state-owned enterprise of strategic importance.

Unions’ turnaround strategy

The selling out of the national airline’s assets, piece by piece to private companies, is far from being a solution to the financial crisis which has made SAA in its current form nonviable, unions have argued. In fact, at the very source of the financial drain of SAA is its increasing reliance over the years on private companies to which different services have outsourced.

These companies have been inflating their profits by overcharging the SAA for services such as security, cleaning, I.T., ground-handling and logistics. The unions believe that the airline can be saved from collapse, if the overpriced contracts are identified and renegotiated or cancelled.

By insourcing the workers involved in providing these services, the unions believe, these tasks can be undertaken by the SAA itself at a much lower cost than what is being charged by these companies.

In order to identify such contracts, a task force was to be constituted according to the collective agreement reached in November 2019 between the SAA management and the unions. However, this agreement, which brought a week-long strike action to an end, was never implemented by the management.

Business Rescue Practitioners had no Business Rescue Plan

In December, the enterprise was placed under business rescue. South Africa’s Company Act allows an enterprise which is likely to be insolvent within six months to be placed under a business rescue plan. While this plan is underway, the company is protected from claims by creditors, giving time for the BRPs, who took control of the company to work out a turnaround strategy.

“Had either the executives or the BRPs implemented what we had proposed… SAA wouldn’t have been in the crisis it finds itself in today,” NUMSA’s national spokesperson, Phakamile Hlubi Majola, told Peoples Dispatch.

To cushion those who may have had to be retrenched even if these measures were implemented, the agreement had envisioned a training layoff scheme, wherein those losing their jobs would have been placed in a recognized institute to undergo training for six months.

During this period, the company would have been obliged to pay only 25% of their salary, while the remaining 75% was to be paid by the Sector Education and Training Authority (SETA), which falls under the Department of Higher Education and Training. In December, the unions had also negotiated the financing of this scheme with the Department of Labor’s Unemployment Insurance Fund (UIF).

“That would have ensured that those workers’ salaries are covered, (while) the airline gets a breathing space to figure out a long term plan,” she said, but “that was not implemented.”

After dishonoring the collective agreement, the BRPs then pushed their own “rescue plan”, which involved closing down route after route, and retrenching employees, which has now finally culminated in the proposal to retrench virtually all its employees and sell off the company in pieces.

While SAA was put under the command of BRPs, they never really had a Business Rescue Plan, the unions complained. Unions have refused to engage in the negotiation process outlined in Section 189 of South Africa’s Labor Relations Act. This section mandates that before laying off employees, the employer must hold negotiations with the unions representing them, in order to explore alternative arrangements to retrenchment, and where that is not viable, to negotiate an agreement on a fair retrenchment package for the employees. Notices have been sent to the unions to begin the process but both NUMSA and SACCA outright rejected the BRPs’ proposal calling for an agreement on the retrenchment package, which would make way for the final liquidation of SAA.

“We are an important stakeholder in this process but we have not been consulted at all on the development of the business rescue plan,” the unions complained in a joint statement. “Instead we are being presented with a purported collective agreement, which is entirely inconsistent with an attempt to save SAA. It’s against this backdrop that we outrightly reject this proposed agreement.”

DPE makes misleading claims about reaching an agreement with unions

Following this rejection, a meeting was convened between the DPE and the unions yesterday, after which the former released the following statement:

“The Unions agreed that in arriving at a solution for SAA, some jobs will be lost, and that employees that remain behind will need to sacrifice some of the unaffordable arrangements that had worsened the airline’s financial position. It was agreed that social plans will be developed to cushion the effect of losing jobs on the affected employees.”

The DPE’s statement was strongly rejected by union members. Hlubi-Majola complained, “We came for a meeting and they issued a statement that did not even reflect what happened in that meeting. That statement reflected their own wishes instead of reality.”

The unions issued a joint statement to explain what happened in the meeting, “It was a talk about having talks, which has not yet resumed. What we only managed to talk about is a possible framework or a draft agreement in the form of a Compact which will guide the objectives under which the negotiations about the future of SAA will take place.”

“We still want to and need to engage with them,” Hlubi-Majola told Peoples Dispatch. “All we are saying is that they need to engage in good faith. Because it really is time now for them to demonstrate what they have been saying all along. The governing party has been saying over and over again that SAA will not be liquidated and SAA will not be sold. So they need to commit to a plan of some kind, which will guarantee the future of this airline.”

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