Employees of South African Airways (SAA) are being asked to submit themselves to an expedited consultation process on possible retrenchments that could see close to 2 270 workers laid off to avoid the liquidation of the airline.
Business rescue practitioners (BRPs) Les Matuson and Siviwe Dongwana said in a statement on Monday that notices have been issued to the eight recognised employee unions as well as management to begin consultations that will affect all 4 708 employees based in South Africa.
The Labour Relations Act states that consultations should be held for 60 days. The first consultation meeting will be held on March 12 and, applying the provisions of the act, the process should end on May 8.
However, with the guidance of a Commission for Conciliation, Mediation and Arbitration facilitator, the BRPs have suggested that the consultation process be expedited and not go beyond April 8.
“The company is currently faced with significant cash flow and funding challenges” states the draft business rescue plan sent to the unions, dated March 9.
“It, therefore, is most unlikely that liquidation will be avoided by the business rescue practitioners if the parties avail themselves of the full 60 days statutory period as they are legally entitled to,” say the BRPs in the document.
Time is of the essence for the BRPs, who have been given an extension to submit their rescue plan outlining the newly-restructured organisation by March 31. This plan needs to be approved by lenders and creditors, and one of the prerequisites for approval is an agreement with labour about the future of the workforce structure.
Should the unions agree to the BRPs’ proposal to finalise the consultations on April 8, it is envisioned that employees who will be retrenched will be identified by April 9 through mutual agreement.
This will be followed by letters of termination being sent to affected employees by April 10.
Ultimately the retrenchment of affected redundant employees is therefore likely to take effect on May 10.
“Our intention has always been to preserve as many jobs as possible through this process while still focusing on having a sustainable airline and platform for growth,” noted the joint BRPs.
Over the past six years, the airline has racked up losses of R26 billion.
The current financial year is not expected to be any better, with revenue, load factors and forward sales being incredibly depressed in the current financial year particularly due to the impact of a number of negative events since October 2019.
In addition to being placed under business rescue in December – leading to the withdrawal of travel supplier insolvency cover, which was reinstated in February – SAA flights were grounded in October, workers had an eight-day strike in November, and the airline has had a lack of funding. This will only be exacerbated by the decline in travel due to the Covid-19 virus outbreak.
“The overall result has seen a decline of R1.3 billion in revenue, with the cost base that remains more or less flat,” the BRPs say.
“The changes required at SAA are therefore both structural and economic. They are urgent if liquidation is to ultimately be avoided in which event all employees will lose their jobs.”
Creating a profitable and sustainable business will involve reducing the current fleet from 48 aircraft to 19 and reducing all unprofitable routes and services.
In the proposed restructured airline, the current 4 708-strong South African workforce will be reduced to 2 440 employees “either on different terms and conditions to those currently existing, or as to ensure that the restructuring can take place,” the document states.
Employee groups that will be affected
“We must emphasise that no final decisions have yet been taken, nor will any final decisions be taken until we have exhausted consultation and hopefully reached an agreement,” the BRPs say.
In a statement, the National Transport Movement’s (NTM) president Mashudu Rapheta said it is disturbed by the number of job losses expected at SAA.
“The number is not what we expected and it is disheartening that such number had doubled from what we were told in November 2019,” said the union. In 2019 unions threatened to go to court over plans to cut more than 900 jobs at the airline.
Rapheta reassured members that NTM would “do everything humanly possible and within the ambit of progressive collective engagements with the BRPs and all relevant stakeholders to minimise the negative impact of the business rescue”. This includes proposing an employee laying-off scheme, calling for voluntary severance packages and looking at the redeployment of skilled labourers to other state entities.
The BRPs also mention engaging with various structures, including the Unemployment Insurance Fund, to find alternatives to the retrenchments.
On the expedited process, the South African Transport and Allied Workers Union’s (Satawu) Zanele Sabela said given the number of times the BRPs mention the possibility of liquidation in the notice “one gets a sense that BRP is trying to scare us into submission”.
“We knew this was coming when SAA was put under business rescue,” Sabela said. “However, we will engage in the process to ensure the best outcome for the workers”.
The South African Airways Pilots’ Association (Sapaa) was more damning in its response. “Whilst there is a need to right-size some parts of the business, these retrenchments are mainly an indictment of current and previous SAA Boards, management and the shareholder for allowing SAA to sink this low,” the association said.
Over 270 pilots could potentially be cut as SAA cuts routes both internationally and domestically where it will only retain services from Johannesburg to Cape Town.
“The basis of the letter is flawed and the assumptions used to determine route cuts are irrational,” said Sapaa.
“The route cuts have rightly been criticized by the government, and a review of the cuts is now underway. There is no business case for SAA to exit the domestic routes, other than that punted by the likes of Mango, who hope to gain from this”.