Union heading to court to apply for SAA business rescue

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Cape Town - Trade union Solidarity announced on Thursday that it intends to apply to the High Court to have embattled state-owned airline South African Airways (SAA) placed in business rescue.

The union intends to bring such an application by 15 May and has the financial backing for the process, Werner Human, the deputy chief operating officer: legal services, told Fin24.

He explained that SAA is technically insolvent and the union qualifies as an "affected person" who can bring a business rescue application in terms of the Companies Act.

"Business rescue of state-owned enterprises (SOEs) like SAA is not a new discussion, but nobody has taken that step yet. We believe we are in a unique position to take this step, not only on behalf of our members working at the airline, but in the interest of the SA public at large - especially taxpayers," said Human.

He pointed out that several political parties and civil organisations have already proposed that SAA be placed under business rescue. In a recent report to Parliament, even the Auditor General (AG) wanted to know why this has not yet happened.
 
Solidarity said the AG indicated in a report that SAA had suffered a total loss of R5.6bn in 2017. The AG also indicated that there was concern about the SAA’s status as a going concern.

The board and management of SAA responded in March to say they are taking urgent steps to address issues raised by the AG and remain optimistic about the airline's future.

"Based on SAA’s financial statements we can see that since 2016 the SAA’s operating loss has increased by 1 000% to R3.7bn. Disturbingly, SAA recently advised Parliament that it will likely lose a further R5bn in 2018. SAA’s accumulated loss over the past five years was R31.6bn," Solidarity said in a statement.

"You cannot have job security without business certainty. We say that at present there is job uncertainty at SAA and business rescue is needed to bring such certainty."

He said Solidarity has written to President Cyril Ramaphosa, Finance Minister Nhlanhla Nene and Minister of Public Enterprises Pravin Gordhan about the intention to apply for business rescue. This was because all three of them have in the past spoken out strongly against the poor performance of SAA, according to Human.

"We believe radical intervention is required at SAA and this is the opportune moment," said Human.

Solidarity CEO Dirk Hermann estimates that the amount taxpayers had to fork out for SAA is the equivalent of double SA’s e-toll costs or 117 Nkandlas or building 300 new schools. It also exceeds the revenue the state expects from the 1% VAT increase this year.

“Taxpayers across traditional lines of division are tired of their money being used as bailout for useless management. The SAA court case will be one of the biggest tax court cases in SA’s history,” claimed Hermann.

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