The fight to save South African Airways continues

Unions struggle for the revival of South African Airways, while the government and private creditors merely disagree over the timing of its liquidation 

June 30, 2020 by Pavan Kulkarni
(Photo: SAA)

The National Union of Metalworkers of South Africa (NUMSA) and the South African Cabin Crew Association (SACCA) have accused the country’s Department of Public Enterprises (DPE) of “destroying” the state-owned South African Airways (SAA).

The business rescue plan for SAA, prepared by the Business Rescue Practitioners (BRPs) hired by the DPE to resuscitate the airline, was presented for voting at the Leadership Consultative Forum (LCF) on June 25, after receiving last-minute backing from the DPE. The LCF is composed of representatives of the stakeholders at SAA, including its workers, creditors and the DPE. 

However, voting was adjourned with the support of the majority of stakeholders, including the unions and creditors. Among the unions that proposed the adjournment were NUMSA, SACCA and the SAA Pilots Association (SAAPA). SA Airlink, one of the creditors of SAA, also proposed adjournment, as did 69% of SAA’s other creditors.

Voting was postponed until July 14, by when the BRPs are expected to present an alternative plan. The BRPs current plan envisions laying off all but a 1,000 of the roughly 4,700 workers employed by SAA.

Following the adjournment of the vote, the DPE withdrew from the LCF on June 28, effectively leading to its collapse. The DPE also accused the unions of collaborating with a competitor airline “who stands to benefit substantially should SAA be liquidated. This is an anti-worker stance.”

Calling the DPE’s statements “cheap propaganda”, NUMSA and SACCA accused the DPE of misleading the people into believing that unions “are responsible for job losses (that will follow), when it is in fact the DPE which is pushing for mass retrenchments.”

The BRPs business rescue plan

The unions argue that what the BRPs have presented so far is not a business rescue plan but a retrenchment plan. It includes no measures to address the real source of SAA’s financial crisis. As per the unions, this is not the cost of labor but the over-priced contracts given to private companies for services which could be undertaken at lower costs by insourcing the workers.

The unions have pointed that reviewing and rationalizing these contracts will significantly reduce the financial strain on SAA, enabling it to retain at least 3,200 workers. As per the unions plan, SAA can start operations with a smaller number of workers initially, and gradually ramp up to deploy 3,200 workers in a span of 18-24 months as the economy begins to make a partial recovery from the COVID-19 shock. 

The unions have created specific proposals on how to address the overwhelming financial challenges at the airlines. These include measures such as placing workers in a Training Lay Off scheme and offering early retirement to 1,000 employees and to those over the age of 50.

The unions allege that the DPE misled them into believing it was willing to negotiate the their plan, proposing to retain 2,900 instead of 3,200. However, at the last minute, the DPE came out in support of the BRPs’ plan.

Unions struggle for SAA’s revival

The DPE, while backing the rescue plan of the BRPs, has nevertheless made it clear that it will not cough up the R800 million required for SAA to start flying operations. This is when other competitors are already resuming their operations. 

“Their position of insisting that SAA only flies again in January 2021 was tantamount to the liquidation of SAA as its market would be taken over by other airlines,” NUMSA and SACCA stated.

The unions’ statement says, “Resuming flights immediately when all other airlines start to fly will enable SAA to retain its lucrative routes such as the CapeTown, Durban and Eastern Cape route in the domestic market, and allow it to keep its dominance in regional markets. Failing to do so, leaves SAA’s market vulnerable to global competitors and local private Airlines like Airlink, Flysafair and Comair.”

The unions thus allege that the DPE-BRPs combine is actively seeking to destroy the state-owned asset for the benefit of global capital. 

They also highlighted that “neither the DPE nor the BRPs even bothered to cancel contracts for leased planes when the airline has been grounded. Instead of imposing a logical force majeure, their deliberate inaction has cost the airline a further 30 billion in the last 3 months.”

NUMSA and SACCA have stated from the very beginning their opposition to any liquidation plan peddled under the guise of a business rescue plan. The unions sought an adjournment for the vote on the BRPs’ plan because failure to secure 75% vote in favor of the plan at the LCF would have triggered immediate liquidation.

The consequences of that would have been even more damaging than the BRP’s plan. On immediate liquidation, all workers would have lost their jobs with a uniform measly severance payout of R32,000, regardless of the number of years of service. The unions postponed the vote as a last ditch effort to explore the possibility of an alternative plan to keep SAA afloat.

SAA’s creditors

SA Airlink, a private airline to which SAA owes R700 million, also backed the proposal to adjourn the vote on the current plan. Airlink and other creditors are unhappy with the BRPs’ plan because it does not demonstrate that it will revive SAA and render it capable of repaying its debts. 

Airlink had previously tried to stop the vote by filing an urgent application at the South Gauteng High Court, seeking an order interdicting the LCF meeting and placing SAA on provisional liquidation immediately. 

The unions had however opposed this application. They insisted that although legitimate grievances were caused to the creditors due to mismanagement by the DPE, the BRPs and the board of SAA, liquidation was not an option. This was because it would punish workers, who were no way responsible for this plight of SAA. 

The court had ruled against Airlink on the grounds that its application could not be treated as urgent, and made way for the voting to proceed.

When the majority of unions and creditors sought adjournment, albeit with different interests in mind, the DPE withdrew from the LCF, effectively resulting in its collapse. 

On the surface, it now appears that the LCF’s three components – labor, creditors and the DPE – all oppose each other and each group has interests antagonistic to the other two.

The maneuvers by these three parties over the coming few days will be crucial in deciding the fate of SAA and its thousands of workers.

However, a closer examination reveals that the dispute between the DPE, which represents the government as the shareholder, and the creditors who represent finance capital, is mainly a disagreement about whether SAA should be liquidated eventually or immediately. It is only the unions who have demonstrated a genuine interest in saving a strategic asset and reviving its financial condition. 

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