SAA unions divided on final offer from govt for voluntary severance packages

A South African Airways aircraft on the apron of Frankfurt Airport in 2018.
A South African Airways aircraft on the apron of Frankfurt Airport in 2018.
Silas Stein/picture alliance via Getty Images

The about 4 700 employees of South African Airways have received a final offer for voluntary severance packages from the state-owned airline's shareholder, the Department of Public Enterprises.

According to the DPE, the proposal will be supported by a social plan, which includes a skills development programme.

The department's voluntary severance proposal includes one week per year of completed service, one month notice pay, accumulated leave paid out, a 13th cheque and a "top-up" amount.

"My message to unions is that this is crunch time. The DPE's offer will give employees a better deal. They will at least get something, especially since we are seeing more opportunities in future when SAA will rise again," Kgathatso Tlhakudi, acting director-general of the Department of Public Enterprises told Fin24 on Wednesday.

SAA employees have not received salaries since 1 May when the rescue practitioners indicated that funds for the rescue process had run out. In mid-April the DPE indicated that the state will not provide any more funds for the rescue process.

The voluntary severance packages proposed by the DPE can be offered to employees immediately once the airline's creditors accept a rescue plan proposed by its business rescue practitioners.

A creditors' meeting is set for Thursday to vote on the rescue plan. Creditors can chose to accept it, review it, or reject it.

The department says it wants to see the rescue plan accepted and help creditors and employees "be co-creators of a new airline and ensure a strong base is maintained for the growth of the local aviation industry".

The rescue plan proposed by the business rescue practitioners provides for the retention of only 1 000 of SAA's current employees, and sets aside R2.2 billion for retrenchment packages. Staff numbers could increase if the "new" airline grows. 

READ | South Africa needs SAA and 'serious players' are interested in its value, says acting DG

The DPE cautioned in a statement earlier on Thursday that a vote against the plan would result in "the protracted and costly liquidation of the airline".

If the 86-year-old flag carrier were to be liquidated, employees would receive a maximum amount of up to R32 000 per employee if funds are available. The liquidation process could drag out over 2 years.

Unions react

In the view of Captain Grant Back, chairperson of the SAA Pilots' Association, the current offer by the DPE would result in "a loss of jobs bloodbath and is completely unnecessary".

"Labour is working on a better approach, which would result in an improved outcome for all parties within the current financial constraints. There is a way for SAA to retain more jobs and offer severance pay for workers [similar to what] was offered to Eskom and many other SOEs while critically preserving jobs at no additional costs to the current plan. We look forward to engaging with the DPE and presenting our proposal," said Back.

A joint statement issued by the National Transport Movement (NTM), the South African Transport and Allied Workers Union (SATAWU); and the Aviation Union of Southern Africa (AUSA) points out that they have always been in favour of restructuring the airline rather than liquidation.

"The legacy of the previous administration and management of SAA was so extensive and pervaded nearly every aspect of the lives of SAA employees. An ambitious and far - reaching approach was therefore necessary to rescue the airline," they say.

These unions believe the broad framework of the social plan created in the Leadership Forum in conjunction with the DPE will play a big role in the re-skilling of employees affected by retrenchments.

They hope the creditors will vote in favour of the proposed rescue plan and that a new, competitive national airline would be created in the end, save jobs and make a positive economic impact for the country. They are disappointed that no money was allocated for SAA in Finance Minister Tito Mboweni's supplementary budget on Wednesday.

Dr Dirk Hermann, CEO of Solidarity, said in a statement on Thursday that the union cannot support the proposed rescue plan because it does not address the historic over-reliance on government funding to enable the airline to stay afloat.
Solidarity believes the plan in its current form cannot bring about an efficient business rescue.

"Technically, South African Airways has been insolvent for the better part of a decade. This was due to mismanagement and government interference, as well as corruption. All of this damage was wreaked before the Covid-19 pandemic which destroyed global aviation," says Hermann.

"If the business rescue plan does not envisage truly radical change in the ownership structure, management structures as well as funding models, then it has no chance of succeeding in the current hostile circumstances."

In the view of Solidarity, a severe skills shortage has always been a key problem plaguing SAA. Yet, although the proposed plan provides for 1 000 employees being retained, it does not specify the criteria to be used.

The National Union of Metalworkers of South Africa (NUMSA) and the South African Cabin Crew Association (SACCA) also do not support the plan, as they believe it will lead to SAA being liquidated in the end.

Rescue plan 

The proposed rescue plan involves government having to raise more than R10 billion to keep the airline from going under. Local banks, meanwhile, hold government guaranteed loans of R16.4 billion which have already been allocated in prior national budgets.

SAA's financial losses totalled more than R10 billion over the past two years, according to documents submitted to Parliament earlier this year. Over the past decade, the government has bailed out the airline with almost R30 billion.

The DPE and unions represented at SAA have been in discussions in a Leadership Consultative Forum, established by the department, to formulate a new business model and plan for the airline's long-term future through business rescue.

In this forum it was committed that the severance criteria would be calculated on a back-dated 5.9% wage increase, which was agreed to in November last year. There will also be an incentive pay scale calculated on employee total-cost-of-employment.

"A new, restructured, viable airline cannot be competitive if it would be required to bear the cost of carrying the current SAA employees," says the department.

"The national airline is not in a position to offer any additional benefits and it is important to recognise that the creditors would be keeping a watchful eye on how much money was being spent by SAA as opposed to what they were trying to recover in the business rescue process."

The department still hopes that SAA could be restructured in a new sustainable, competitive airline that provides integrated domestic, regional and international flight services. Employees who take up the voluntary severance offer will be entitled to re-apply for positions in a new restructured company as it grows.

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