SAA moves to cut almost half its workforce

As business rescue practitioners finalise their draft rescue plan it is imperative they reach an agreement with unions.
‘Most unlikely’ liquidation will be avoided if unions insist on the full 60 days for retrenchment consultations, say the BRPs. Image: Shutterstock

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. 

Tick tock

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.

Guzzling cash

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.

Read: SAA may have recorded a loss of more than R9bn in the past year

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.

Read: SAA agrees deal to end eight-day strike

“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.” 

Read: SAA may sell Heathrow slots to raise cash – sources

Creating a profitable and sustainable business will involve reducing the current fleet from 48 aircraft to 19 and reducing all unprofitable routes and services. 

Read: SAA cuts domestic flight routes to one

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.

Unions respond 

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”.

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if saa can survive without 2270 less staff (let alone the financial structure), it simply confirms that it is currently 50% overstaffed meaning at currently employed people who are just doing half of his/her work but earns a full salary + perks

to be quite honest i won’t be surprised if eskom has the same ratio of overstaffed /overpaid employees

Now I know why SAA is where they are. If they cannot even spell “sabbaticals” correctly in their spreadsheets (despite a spell checker) how is the rest of their business managed?

Hopefully they cut the dead wood first

This lot will cut pilots first.

It is the ANC way, cut the experienced first.

Even more reason then not to step on a SAA plane

Somewhere in the BRP verbage is a statement that PDI’s will be protected. The silly show will roll on, gobbling taxpayer cash to feed ever hungry ANC mouths.

Just “silly”.

They must get “agreement” for their plan from the unions.

THAT’S THE PROBLEM ALL ALONG you ….S.

Capitalism NOT Socialism is a country builder. Just ask the socialist countries!

SAA must be closed down. Bleeding cash for another two months will just put it deeper in debt. And, getting rid of aircraft is not that easy. Even if it is hired aircraft. Contracts and things like that.
Heaven help us.

Too little too late. SAA should have been liquidated long time ago. One set of affected parties that has not been consulted is THE TAXPAYERS. Why not? We are not represented in government and,for what it is worth, there is lack of trust in the competence of government to act in the interest of taxpayers.
Speak to anyone in the turnaround industry and they would agree that SAA is a Dodo and not worth investing in, but our arrogant government, led by Gordhan, are hell bent to keep this vanity asset afloat just to see it fall from the skys again and again.

Cutting your fleet by 61% and only cutting staff by 48% does not fix the wage problem. It will surely only exacerbate it 😐

It’s a little more nuanced than that. The wage bill could drop by more than 48% if you look at the detail in the different categories. Add to that that some of the fleet may not have been utilised optimally and that planes are not all the same size with the same operating cost per passenger, and the plan is probably not as stupid as you make it sound.

Sure, I can agree with that. What I also mean to draw attention to, is that it’s been said that SAA is overstaffed, and the reduction in terms of staff numbers, whilst it /could/ reduce the wage bill by more than the 48%, does not necessarily resolve the issue of the company being overstaffed. There could be more staff required for the fleet that’s left over, sure, but I doubt that the issue has been appropriately addressed. Which then begs the question of whether this business rescue is being conducted in a manner which will see success. The point of a business rescue is to determine whether the airline can be run profitably, or if it should be shut down. It is not a means to delay an inevitable shutdown. Without any of the details, it’s hard to know what’s truly happening. My positivity has run out.

The disgraceful thing is that senior managements scandalous conduct ie the Dudu and her cabal, mismanaged and stole SAA broke and some lowly paid ground staff get retrenched because of the evil ones conduct. One has to be sympathetic to the unions-the senior management(and inept ANC board of thugs) destroyed the place and now junior employees lose their livelihood.

Unions should demand the jailing and sequestration of the guilty parties.

Agree, Sam. It’s also time that more people understand that it is THEY who have been stolen from. This actually applies to the whole of SA, especially the poor. They need to realise that Zuma and his ANC henchmen have robbed the poor. Of decent education, healthcare, sanitation, housing and the rest. And to stop parading around to support him when he goes to trial.

Bad news for the KFC at OR Tambo of course, esp the business from the air hostesses

Should have been done 5 years ago!

It won’t be long before the unions perform the national dance for us and overseas visitors and potential investors accompanied by tyre burning and trash can kicking. Best auditorium will be the Tambo concourse and international arrivals hall.

If only they could work as enthusiastically as they strike.

Agree the protest calory burn is on the level of a Tour de France winner

I’m pretty sure they could shed more managers. I suspect that many in managerial positions are desperate to cling on to their makework positions

If these central planning communist clowns in Luthuli House really wanted to do the right thing, if they really wanted to turn the economy around for the better, and save South Africa, they would simply ask Glen Orsmond, the CEO of Comair, to also run SAA on the side.

If they wanted to do the right thing, they would immediately put all SOEs and municipalities out on tender. They would increase the mental capacity in Luthuli House by converting it into a care centre for the mentally handicapped. They would make all cadres and government employees re-apply for their jobs. They would reaffirm the sanctity of property rights by abandoning the redistributive rates and taxes regime, by scrapping all taxes on capital formation, by burning the Mining Charter and by ending BEE requirements.

They don’t want to do these simple things that will turn the economy around in an instant. They want to keep on kicking the can down the road until hyperinflation of the currency consumes all of us.

Retrenchment is a blunt weapon.Its only purpose is to cut the wage bill to a manageable level. It does not guarantee that only “good” employees will remain behind. Like a surgeon who amputated the wrong leg, the deadwood usually stays behind because they cannot get employment outside of their employer at the rate and benefits they have become used to.

A retrenchment is usually followed by a significant loss of business capacity and exposure to serious risks. It can take a company 2-5 years to recover from a mass retrenchment. During that time it the organisation will rely on contractors and consultants to run the company.

The gravy train has finally slid into the siding and the excess baggage is hopefully being tossed out onto the platform, with security waiting to take them off to court and then prison.

Now for every other SOE to follow the same route.

South Africa became the leading industrial nation in Africa through our intrinsic people skills, work ethic and abilities; more than a million have left and are involved in senior positions in global corporates. We have everything we need here to turn SA into a highly competitive world leader.

Hopefully, this will send a message to Dear Cyril, the communists and the unions.

I am afraid that I do not share your optimism but you may be right if you have the next 50 years to spare and educational levels and just about everything else starts going right from tomorrow.

The unions/government won’t agree to any of this. They thought that the BRP process would rearrange a few chairs, reassign a few of their family and friends in management positions, throw in a few more billions of taxpayers money, and all would be well. Next stop: burn down OT concourse and hijack a few Boeing 737s.

Now can we get Government to cut its ” work force ” by 50 % . The ” work” in work force is a misnomer of course.
It will go some way to cutting the wage bill by R 160 billion.

saa en eskom have way too many workers,doing nothing.saa should be closed down,end of story ,more than 60 billion have been given to them,for nothing.

1.7 Managers per pilot. What a disgrace.

The things that make an aeroplane fly in order of importance:
Cash, Spares, Technicians, Crew, (good) rostering clark, and a CEO with vision.
Very far down on the list are superfluous “managers”

Very well noted Danny. My guess is that Eskom is the same. Now factor in the “manager’s” salaries and the problem starts to become apparent.

End of comments.

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