Rolls-Royce added to list of lessors SAA must pay

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SAA has been in business rescue since December 2019.
SAA has been in business rescue since December 2019.
Silas Stein/picture alliance via Getty Images
  • Rolls-Royce has been added to the list of lessors to be paid from R1.7 billion allocated in SAA's rescue plan.
  • Furthermore, a notice to affected persons indicates three issues remain to be solved in the SAA Pilots' Association deadlock.
  • SAA seeks to achieve a restructured airline that is commercially viable and independent of the fiscus.

An amendment has been made to an annexure of the rescue plan of South African Airways, with Rolls-Royce added to the list of lessors and their claims.

This is according to a notice to "affected persons" published by the state-owned airline's rescue practitioners on Monday 26 April.

According to the notice, an allocation of R1.7 billion has been made to lessors from which Rolls-Royce will now be paid. The BRPs further state that the amendment of the plan and payment to Rolls-Royce will have no effect on, nor prejudice to any of the affected persons or the lessors.

"The rescue plan provided that, provided that any amendment thereto will not be prejudicial to any of the affected persons, the BRPs shall have the ability, in their sole and absolute discretion, to amend, modify or vary any provision of the plan, provided that at all times the BRPs act reasonably," states the notice.

Pilot deadlock

In a notice to affected persons dated Thursday 22 April, the BRPs state that the business rescue of SAA seeks to achieve a restructured airline that is commercially viable and able to continue operations without depending on the fiscus.

That is why, the BRPs say, they sought, in addition to dealing with legacy debt, to ensure overheads are also reduced drastically in order to make SAA competitive and sustainable. A key area is reducing the cost of labour.

A section 189 process has concluded for all managers, specialists, cabin crew and ground staff. Those in these categories who have not been retrenched but reappointed, now all have new terms and conditions of employment with reduced benefits and salaries.

"This is vital to ensure that the airline operates on a basis where its costs do not outstrip its revenue," states the notice.

No agreement has, however, been concluded with the SAA Pilots' Association (SAAPA). The rescue practitioners regard a long-standing regulating agreement SAAPA has with the airline as "a significant impediment" to "a reduction in costs, increasing productivity and operational agility". 

They go so far as to claim that the regulating agreement fundamentally inhibits SAA's viability and sustainability due to its evergreen nature which "prevents SAA from achieving meaningful and expeditious transformation in compliance with the Constitution and the Employment Equity Act".

In particular, states the notice, the application of seniority in terms of the RA directly controls the manner in which pilots are employed and dealt with by SAA, including promotions and salaries.

"Given the make-up of SAA's pilot list, which comprises overwhelmingly of white males, this operates to the detriment of and unfairly discriminates both directly and indirectly against black, coloured and Indian men and especially women", states the notice.

"The regulating agreement also removes core elements of decision making from the board and management of SAA and precludes SAA from giving effect to its procurement obligations."

The notice also states that the RA "no doubt makes SAA significantly less attractive to potential strategic equity partners", which the Department of Public Enterprises has indicated is vital for a new SAA to get off the ground.

SAAPA members have been locked out by the BRPs since 18 December 2020 when no settlement agreement could be reached. The deadlock continues.

The practitioners advised SAAPA during February and March this year that certain aspects of the settlement proposal - like an ex-gratia payment (totalling R85 million) to pilots over three years and the balance of the severance payment (R129 million over three years) will no longer be available once the business rescue has ended.

In the view of the BRPs, a key element for any business rescue to succeed, including that of SAA, is for all affected parties to accept the principle of making compromises in order to allow the business to continue and avert liquidation. 

According to the notice, as SAA sees it, there are three issues remaining that need to be resolved in order for the parties to settle: the timing on the payment of the agreed severance payment; the preferential re-employment clause; and the timing of the payment of the immediately payable amounts.

Urgent application

An urgent application by SAAPA in the Labour Court in Johannesburg has been postponed for hearing until 15 June. The application was mainly to declare the SAA lockout unprotected or unlawful.

SAAPA wants to prevent the airline from using replacement labour during the ongoing dispute with the carrier declared illegal. The union said in a prior statement that, should the lockout be declared unlawful, it is prepared to stop the current strike by its members immediately.

SAAPA members recently started the strike in order to prevent a situation where the company lifts the lockout only for some pilots, especially training pilots, who are needed to get the airline back in the air again.

Furthermore, SAAPA has indicated before that it has agreed to cancel RA the day after its members are retrenched in terms of the RA.

"Our members are all just seeking what is lawfully owed to them. We are also dismayed that what is essentially a legitimate labour dispute between employer and employees has now become in part an ugly and hurtful race-driven debate," SAAPA has commented in the past.

"While the amount looks substantial, it includes a year of unpaid salaries for over 350 pilots as well as retrenchment pay for our pilots, some with 30 to 40 years of service, and would be subject to taxation."

SAA has been in business rescue since December 2019. The rescue practitioners are finalising matters so that they can exit the process and hand the airline back to the interim board. A receivership has been put in place to finalise the last payments stipulated in the rescue plan over the next three years.

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