SAA staff are being offered extremely generous severance packages – averaging R580 000 each – at a total cost of R2.2 billion that is due to come from taxpayers’ pockets.
This includes retrospective increases and incentive bonuses, but is still not enough for several unions.
The offer comes at a time when companies which did business with SAA will be lucky if they see 7.5c on every rand that the bankrupt airline owes them. The debt amounts to about R11 billion in total and creditors may have to give up any hope of ever seeing the money they are owed.
The debt, however, excludes that to banks, which is guaranteed by the state.
The acceptance of the severance packages is a prerequisite for the approval of SAA’s rescue plan, according to which the workforce of the airline will be cut from the current level of about 4 700 to 1 000.
Creditors were meant to vote on the plan on Thursday, but it was postponed after unions and creditors said the plan was deficient. They are expected to meet again on July 14.
Although the business rescue practitioners have indicated that government is ready to finance the plan, it is still not clear where the money will come from.
Finance Minister Tito Mboweni did not provide for any extra funds for SAA in his emergency budget this week, which means that the only official provision which has been made for the airline is through its guaranteed debt of R16.4 billion.
An additional R10 billion would be needed to successfully fund the offer. Trade union Solidarity has accepted the packages, but Numsa, the SA Cabin Crew Association and the SA Airways Pilots’ Association are still of the opinion that the airline is not offering enough money.
However, according to Chris Jacobs, a labour expert and director of OIM International, the packages are unaffordable and totally out of step with what employees in the private sector could expect in a similar situation.
Dawie Roodt, chief economist at the Efficient Group, said the packages were excessive.
In the private sector, employees get nothing when there is no money, he said.
According to Roodt, creditors are being dealt with harshly when compared with workers, which sends the message to businesses that one simply should not do business with government unless it’s on a cash upfront basis.
According to a confidential letter that acting director-general of public works Kgathatso Tlhakudi sent to unions on Tuesday, a copy of which has been seen by City Press’ sister publication Rapport, SAA employees have been offered the following:
- A severance package equivalent to one week’s salary for every year of service;
- Salary for a notice month;
- A payout for any accumulated, untaken leave;
- A pro rata 13th cheque;
- Supplementary payment to bring the above amount up to R200 000 if it is less than this amount;
- Packages calculated on the basis of a salary increase of 5.9%, backdated to April 1 this year;
- Back pay due as a result of the 5.9% salary increase up to July 31; and,
- Incentives of R100 000 for employees whose total cost of employment is less than R450 000 per year, R75 000 for those who earn between R451 000 and R550 000 per year, and R50 000 for those who earn between R551 000 and R750 000.
According to Jacobs, no one is entitled to a 13th cheque and the leave being paid out should be limited to a leave cycle of one year. It’s not clear whether that’s the case here.
According to Tlhakudi’s letter, the salary increase was agreed to in November last year. What he does not say is that this followed a strike which hastened the downfall of the airline and that it had been expressly stated that the increases would only become a reality if money was available.
Judging by Tlhakudi’s letter, it appears that at least R800 million of the R2.2 billion consists of extra gravy from the SAA gravy train.
It’s also more than the R600 million which has been made available to pay the trade creditors.
According to the document, pilots will get on average R1.9 million each, while cabin crew will get R352 000, cargo and operations personnel R351 000, those who work on the simulators R476 000, office personnel R379 000, and management and management specialists will get R477 000.
Jacobs said SAA’s “heavy workforce” was a factor in its downfall.
According to a source in the aviation industry, who asked to remain anonymous, the salaries paid to SAA’s cabin and operations crew are about 50% higher than the industry standard.
The airline’s pilots earn about 2.4 times more than their peers and office personnel about 2.3 times more than the industry standard.