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SAA BRPs present ‘final’ settlement agreement to pilots

Says parts of the offer – aspects that it wants to pay off over three years – will lapse once rescue process is completed.
So far pilot association Saapa is again standing firm. Image: Guillem Sartorio, Bloomberg

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).

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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.

Limited-time offer

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”.

Undefined deadline

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.

Ever-moving target

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.”

Conditional offer

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. 

Read:

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.

Read: Government to foot the bill for ‘restructure’ of new SAA

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“The South African Airways (SAA) business rescue process is set to conclude “soon” according to its rescue practitioners Siviwe Dongwana and Les Matuson”

With reference to the above the question is still: to be an “operating and rescued organization”, has any of saa’s planes been in the air since the “rescue” took place????

Another question: Just spell it out – how much did this “rescue” cost the taxpayer in terms of the rescuer practitioner’s account whilst the so called “rescue” seems to be just more money to saa from the taxpayer with no long term operating plan and an illusive outsider that nobody knows the name of yet.

looks to me like another pipedream of sa government and saa’s saviour / rescuer

Johannes, yes one A350 was sent illegally with under qualified pilots all the way to Brussels to fetch a bakkie load of ineffective expired vaccine.

They damn lucky they did not crash…..cost R5 million.

I reckon a local taxi would have done the same job in about the same time !

“Oh what a tangled web we weave/When first we practice to deceive”

The business rescue process at SAA is an attempt to prop up the SOE debt house of cards while the cross-default risk threatens to bring down the entire government. SAA, like all the SOEs and most municipalities, is technically bankrupt and would have triggered cross defaults that implies that all government debt has to be repaid to lenders immediately.

In effect, the business rescue process at SAA functions to “rescue” all the government employees, not only SAA employees. All government employees will lose their salaries and pensions in the event of a cross-default. The state won’t be able to finance the public sector wage bill or social grants. It will impact directly on the value of the GEPF as they are the largest lender to the government.

The well-being of grant recipients, government employees, members of the GEPF, employees at municipalities and all politicians depend on the efforts of these business rescue practitioners. They are pretending to rescue something that is unsalvageable. They are simply playing for time, delaying the inevitable.

In my opinion the government will never default on their debt. Remember that the majority of government debt is denominated in Rand, the remainder is mostly denominated in USD and the SARB has enough reserves to cover this. In the event that government runs out of money or debt become due the printing presses at the SARB will simply run overtime. This is the real threat to South African society, where not only do you lose out on the tax money that is being wasted but that rapid inflation and currency devaluation will erode all locally denominated savings and investments. What happens after this is well documented by our northern neighbours.

This is why many people (myself included) and a select few advisors are moving their and their clients’ money out of SA slowly but surely as the medium to long term inflation and currency devaluation risks increase.

I agree. Governments default on their debt in various ways. Mugabe refused to repay his debt to the IMF. This is the crude variety of default. Hyperinflation or printing is slightly more sophisticated, and becomes the only option when investors refuse to buy government debt. When investors lose trust in the government’s ability to service the debt, hyperinflation becomes the only option. The size of the GEPF is about the same size as the government debt. So, that enables our government to default in the following, more sophisticated and opaque way.

Financial repression is a sophisticated default. The IMF proposes this solution to member states. America defaulted in this way in the decade after the Vietnam war, and they are defaulting in this way at the moment. They manipulate the yield on the government bond lower than the rate of inflation. The inflation-adjusted interest rate is negative. This implies that the purchasing power of the bonds is used to service the debt. This implies that the pension funds that hold “risk-free” interest-bearing instruments service the debt. This means that pensioners will service the debt.

Financial repression is opaque and nobody realises what is happening. Voters keep on supporting the government that steals from them, because they are under the illusion that the economy is strong, while in fact, the GDP growth is entirely a producr of inflation. Savers are buying inflation. The debt stays the same in nominal terms while inflation improves the debt/GDP ratio.

Our pension savings allow rating agencies to give us a junk rating because our government has the ability to default without citizens realising it.

A default is a default though. The cost to citizens is the same, no matter the shape of the default.

Well yes, but the USA is also printing money non stop! Why do you think the rates are close to zero in the USA,UK, Europe and AUS… They cant afford to repay their own debt! If you move offshore you are forced into “risky” assets if you want any yield.

100%. Cross-default and resulting inflation/bank failure is the real risk.

Perhaps SSA should suggest to the rescue ninjas that they get paid over 3 years ?

I sincerely hope that the responsible minister and his deputy each take a substantial pay cut as their scan of control/responsibilities have diminished considerably

If they had one single shred of integrity or shame, they would jointly commit hara-kiri on live tv. But no risk whatsoever of that happening, unfortunately.

This entity is making no money at all. Why all the fuss trying to keep it going?

Anyone digging into what is happening at SAA Technical? Alarm bells!

For sure! This division announced it was late with salaries end of March – if memory serves….

Unfortunately I noticed in a lot of government related cases that the more we as economicaly educated people try to convince the government of their questionable economic decisions, the more they stick to their guns to suit their own pocket while saying ‘apartheid has ended you know’

As one Andre de Ruyter is finding out at Eskom.

End of comments.

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