Relief as SAA is able to pay workers their January salaries


Following concerns over whether South African Airways would have been able to pay employees' salaries this month, it has now been confirmed that the embattled state-owned airline has the money available to do so - at least for January.

SAA informed employees on Friday that it will pay salaries on the normal scheduled payment dates for January.

A spokesperson for SAA's business rescue practitioners told Fin24 on Friday that, although there is still no sign of the R2bn promised by government, SAA employees will receive their January salaries.

"The BRP and management have taken various actions to ensure that cash is conserved. As a result, we have sufficient funds to pay salaries," said Louise Brugman. She added that the deadline for the business rescue practitioners to submit their business rescue plan for the airline is still before or at the end of February.

saa payment

Anton van der Bijl, head of the union Solidarity's legal department, told Fin24 the union had been worried about whether SAA would be able to pay salaries this month. He said the news that payment would be forthcoming was met with relief. 

SAA was placed under business rescue in December last year. At the time, government and creditors jointly committed R4bn to the process as post-commencement finance (PCF). The private sector has already lent SAA R2bn in post-business rescue funding and government had promised to provide another R2bn.

Earlier this week, Finance Minister Tito Mboweni said Treasury was still trying to find additional financing.

"Government showed its intention to try and save SAA by making the decision to put the airline in business rescue. Apparently, the banks had certain terms and conditions before they would lend any more money to SAA. We don't know what those would be," said Van der Bijl.

He said the lack of having obtained the R2bn has already led to SAA cancelling or consolidating a number of flights during this week. It is as yet not clear whether the same will be done next week.

Asked whether there as been any talk about retrenchments should the delay in obtaining the R2bn continue, Van der Bijl said the union was told that, if the R2bn were not obtained, it could ultimately result in jobs being placed in jeopardy, or even the liquidation of the airline. This is, however, not yet the case.

At a press conference in Davos, Switzerland on Friday, Mboweni was asked directly when the funds would be forthcoming. He declined to answer publicly, opting instead to answer questions about the troubled airline on the sidelines of the event. 

A reliable source, who prefers to remain anonymous, but who has direct knowledge of SAA's financial situation and operations, told Fin24 he too does not think government intends to wilfully squeeze SAA into liquidation. In his view, the likely conditions set by the banks is that government must show that it has competent management in place at SAA to execute whatever strategy is decided on to save the airline and make it sustainable.

"Government usually has some 'escape doors' available to access emergency funding. The question is why they would not use such an 'escape door' in the case of the R2bn needed for SAA," he commented. "I think it comes against the backdrop of global sensitivity about sovereign debt levels and rerunning of budgets."

Failure to implement

In his view, there is no way that government - after making a clear promise to pay the R2bn - could not follow through as this would create a huge trust issue if it does not follow through with the payment.

"In my view, the single biggest threat at SAA has been its inability to execute on strategy. Lenders always want to see progress made in this regard. So, they likely put the condition that they want to see that SAA has the capacity and gumption to make tough decisions to execute on a business rescue plan," he said.

Numsa spokesperson Phakamile Hlubi–Majola told Fin24 on Friday the union had been informed by business rescue practitioners that, if the R2bn were not obtained, SAA would face liquidation.

"We are very concerned about this. If the R2bn is not obtained, it puts the business rescue process in jeopardy," she said. Numsa questioned claims by Treasury and the Department of Public Enterprises that they had been trying to obtain the R2bn promised.

"If they had been truthful about this intention, the money would have been available in December already and they would not still have to scramble for it by now in January," she said.

Earlier this week the South African Cabin Crew Association issued a statement referring to a "business rescue plan" it proposed last year during a strike it had undertaken at SAA in November.

This plan addresses the losses made in SAA's international business by proposing commercial joint-venture agreements with companies such as Ethiopian Airlines and Air Mauritius. It also includes proposals for a joint venture agreement between SAA Technical and Lufthansa or a similar type of organisation.

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