SAA employees, unions and creditors asked to support business rescue

The Department of Public Enterprises (DPE), has on Thursday 2 July, cautioned South African Airways (SAA) employees, labour unions and creditors that liquidation — the process of winding down the airline and disposing of its assets — will lead to financial hardship for employees and substantial undervaluation of assets. The department, instead, pleaded with SAA stakeholders to realise that business rescue provides a better outcome than liquidation. 

“[It] should be supported for their collective interests,” said the department in a statement on Thursday. 

VOTE FOR SAA BUSINESS RESCUE 

The department said SAA BRP’s have scheduled a creditors meeting for Tuesday 14 July to vote on the business rescue plan. 

“A vote in favour of the plan by 75% of the voting interests would be required to carry the vote. A vote against the plan would result in the protracted and costly liquidation of the airline,” it said. 

“As the shareholder on behalf of government, we are of the view that business rescue is a viable alternative to liquidation — one which supports job preservation and the ability to bring the airline back from the brink to a position where some employees, labour unions and creditors can continue to contribute to the South African economy and its integration into the global economy,” it added. 

DEPARTMENT WARNS AGAINST LIQUIDATION

In the case of liquidation, the department said a liquidator will be appointed to consolidate the company’s assets in order to raise capital which will be distributed to the creditors when the airline is wound up. 

The department said creditors, would in all likelihood, receive a negligible dividend after all secured and preferred creditors have been paid in the liquidation proceedings. 

“For employees, the liquidation of SAA means they would receive a maximum of R32 000 per staff member, regardless of years of service, to the extent that there are funds available. They will only receive payment once the final liquidation and distribution account has been approved which can take up to 24 months,” it said. 

“The DPE is convinced that the R2.2 billion budgeted for Voluntary Severance Packages (VSPs) for SAA employees is the best available option at a time when government is faced with massive financial demands and fiscal constraints,” it said.  

The department said VSPs, can be offered to employees immediately after a creditors vote endorses the Business Rescue Plan, meet the requirements of Basic Conditions of Employment Act and the Labour Relations Act, including one week calculated per year of completed service, one-month notice pay, accumulated leave paid out, a 13th cheque and a top-up of severance packages. 

TRANSFORMATION OF SAA WILL TAKE SACRIFICE

The DPE supports a restructuring process which would achieve the following: 

• An internationally competitive performance; 
• A demographic profile of skilled, competent and committed employees; and
• For the employees that remain, the task will be to grow the airline and provide opportunities for their former colleagues to be re-employed. 

“It would require a level of commitment and cooperation from both SAA and the unions to overcome the devastating consequences of the COVID-19 pandemic where thousands of jobs are being lost on an unprecedented scale in South Africa and globally,” it added.