The South African Airways (SAA) business rescue process is set to conclude “soon” according to its rescue practitioners Siviwe Dongwana and Les Matuson.
However, the airline has yet to come to an agreeement with the SAA Pilots’ Association (Saapa).
One issue of contention between the parties relates to whether severance payments to pilots who will be retrenched will be calculated in terms of the total cost of employment (TCE) prior to – or subsequent to – business rescue; the old TCE versus the new TCE.
In a business rescue update sent to members of Saapa by the rescue practitioners on Wednesday, which Moneyweb has seen, SAA proposes that severance payments be calculated in terms of the old TCE (a considerably higher amount) – but that the difference between the old and the new TCE “be repaid through the receivership over a three-year period”.
Seen by the state-owned airline that has avoided liquidation thanks to taxpayer-funded bailouts as a concession – despite all existing employment contracts being based on the old TCE and the 36-month wait before the full amount due is paid – this part of the offer has been pegged at R129 million.
A second aspect of the proposal – an ex-gratia payment “for the purposes of cancelling the Regulating Agreement” (which will have a negative effect on the conditions relating to a Saapa member’s employment at the airline), pegged at R85 million – would also be paid over three years.
The rescue practitioners state that these two aspects of the proposal, representing a total of R214 million, “will no longer be available once the business rescue has ended”.
However, in their update, Dongwana and Matuson give no indication of when they will exit the company and thereby complete the rescue process.
They state only that “the exit from business rescue has been delayed by the signing of an agreement with the [airline’s] lenders” and that “this should be finalised soon”.
They previously stated that the business rescue process would be completed by March.
Saapa chair Grant Back says no agreement has yet been reached between the association and the airline.
Dongwana and Matuson however believe the parties are “relatively close to settling on the outstanding items”, but note their concern at “what appears to be an ever-moving target of demands” by Saapa.
They cite Saapa’s request that its members be paid their 13th cheques and remuneration for December 2020 “immediately” and “without delay or conclusion of the settlement agreement”, according to the rescue practioners’ update.
This relates to the as-yet unpaid 13th cheques for the financial years to the end of:
- March 2019 (the ‘2019’ 13th cheque, payable in April 2020), and
- March 2020 (the ‘2020’ 13th cheque, payable in April 2021).
The rescue practitioners do not dispute that the two 13th cheque payments are due.
They state however that: “SAA proposes that the 2020 13th cheque be paid pro rata until 18 December, 2020.” This is the date on which Saapa members were locked out of the airline.
Saapa members have not been paid since March 2020, nor have they been retrenched.
Saapa has in fact demanded that pilots who formed part of the Section 189(3) notice dated July 18 last year be retrenched by no later than April 15.
In elaborating on Saapa’s “ever-moving” demands the practitioners state: “The latest being their demand that the two 13th cheques and salaries for 1 to 18 December 2020 be paid out immediately before any further engagements will be considered by Saapa with the BRPs regarding the settlement proposal.”
The rescue practitioners say they have agreed to make the above payments, but that the funds will only “form part of the payments to be made once the settlement agreement is finalised”.
Saapa members have been locked out of the airline since December last year over the pending cancellation of the Regulatory Agreement (RA).
Although Saapa has agreed to change some of its conditions of employment which were tabled by the Department of Public Enterprises (DPE), negotiations over the RA reached a deadlock last month.
The deadlock in negotiations prompted Saapa to embark on an indefinite strike since the beginning of April.
Saapa has also demanded that the airline pay the pilots their remuneration upon retrenchment.
The company has only offered to pay the pilots post the lifting of the lockout and not up until their retrenchment date.
SAA has received R7.8 billion of the R10.5 billion that was allocated for the implementation of the business plan in the 2020 medium-term budget policy statement. This amount covers payments to employees, payments to post-commencement creditors and unflown ticket liabilities.