Registered users can save articles to their personal articles list. Login here or sign up here

SAA on collision course with trade unions in a fight for survival

It’s sink or swim time for the national airline, as it contemplates retrenching up to 9% of its staff.

In the video above, SAA Interim CFO Deon Fredericks talks about SAA’s wage negotiations with unions, retrenchments, cutting costs and what SAA’s turnaround strategy entails.

SAA appears to be on a collision course with trade unions as it contemplates retrenchments – perhaps as much as 9% to 10% of its 10 000-strong labour force (including subsidiaries) – in a fight for financial survival.

Trade unions were notified on Monday that retrenchments are being contemplated. The National Union of Metalworkers of South Africa (Numsa) and the South African Cabin Crew Association (Sacca) say they learned of the restructuring and retrenchment plans through the media. They have called for the SAA board to be scrapped, saying it is unfit to run the airline, and plan the “mother of all strikes” in response.

SAA refutes claims that labour was notified of the restructuring and retrenchments via the media. At a press briefing at SAA’s head office near OR Tambo Airport on Tuesday, the airline’s interim CFO Deon Fredericks said a Section 189 notice in terms of the Labour Relations Act was issued to recognised trade unions on Monday. This is a prerequisite whenever retrenchments are contemplated.

Threats

A joint statement by Numsa and Sacca says demands for a wage increase of 8% have been rejected by the airline, while Air Chefs staff and airline pilots received wage increases of between 5.9% and 7%. “This is why we are questioning the timing of this announcement. It is a veiled threat to get workers to drop their demands for wage increases and for the removal of the SAA board. They want to strike fear into the hearts of our members. We condemn the management with the contempt they deserve,” says the joint statement by the trade unions.

Acting Human Resources General Manager Martin Kemp explains that Air Chefs was subject to the catering bargaining council, while pilots were able to enforce a 2010 agreement on salary increases after this went to arbitration. The airline was obliged to honour these agreements.

Says Fredericks: “It is our hope that our unions will grasp the full extent of the financial situation we find ourselves in and engage with us in finding a constructive way going forward.”

He adds there is no finality on the number of workers to be retrenched. A figure of 944 has been mentioned which, depending on the seniority and type of worker, could yield savings of R700 million a year. The final figure on retrenchments will only be known once consultations with the unions have run their course.

Last year the airline saved R600 million through more efficient procurement and cutting out agents and middle men.

The airline says it has contingency plans in the event of a labour strike, but adds there is little it can do if there is a complete shutdown of operations.

Labour unions have threatened a total shutdown of the airline, which could sink it outright.

SAA is under pressure from lenders to show progress in its financial turnaround.

In June it was announced that SAA needed an additional R4 billion to survive the current financial year. Government has committed to repaying the airline’s R9.2 billion guaranteed debt over the next three years. SAA has run up cumulative losses of more than R28 billion over the last 13 years, and government is keen to find an equity partner to reduce the airline’s drain on the fiscus. Fredericks says reaches have been made to potential partners, but that there is little concrete interest until the airline is financially stabilised.

Read: SAA unlikely to ‘ever’ be sustainable in current configuration

and: SOEs’ results proof of massive problems

The airline’s restructuring plans include subsidiaries Mango Airlines, Air Chefs and SAA’s technical divisions.

Cutting costs

Fredericks said ongoing negative publicity about the airline is costing it dearly in terms of sales. Previously, SAA would make promises to lenders, now it is able to show turnaround results: such as the R600 million savings on procurement and technical improvements that reduced aircraft repair times from 63 to 35 days. “This is based on a pilot, but it shows what can be achieved if extended across the airline,” said Fredericks.

Labour costs accounts for 24% of turnover, and fuel 27%. There is little the airline can do to reduce fuel costs, which is why it is forced to look at reducing staff numbers. Management has identified non-core assets that could be sold to realise funds. The airline has also made progress in improving route profitability and identifying new routes under Chief Commercial Officer Philip Saunders.

“If this was a growth market, we would be having a different discussion,” said Fredericks. Average fares dropped 12% in US dollar terms, while passenger volumes were up just 2% over the last year. Another area of focus is fleet optimisation around Airbus A350s, which are renowned for fuel efficiency and low maintenance costs.

There are questions about the airline’s political capital to drive change, given that so many senior appointments are acting rather than permanent – a policy that appears to leave the door open for an equity partner to appoint a management team of its choosing.

“SAA has created an enabling environment of engagement with all its internal stakeholders, especially labour unions. We understand that this is a difficult time for all employees,” says Fredericks.

“SAA’s primary goal is to transform into a financially sustainable airline, with a renewed focus on driving customer centricity, commercialising the airline, route network profitability, strengthening commercial and aviation skills and a series of strategic initiatives that will refocus the organisation in driving a profit and loss ethos with a strong focus on cost management revenue and cost.”

Get access to Moneyweb's financial intelligence and support quality journalism for only
R63/month or R630/year.
Sign up here, cancel at any time.

AUTHOR PROFILE

COMMENTS   39

To comment, you must be registered and logged in.

LOGIN HERE

Don't have an account?
Sign up for FREE

The labour unions are as much responsible for the economic problems as the ANC government in South Africa.

The labour unions are threatening to shut it down. Please go for it. At last someone has the balls to do the right thing.

Wish you guys all the luck in the world. And the same goes for every SOE bar Eskom.

The pain a labour union causes to a profitable company by striking, is ———- lost profits. That works.

The pain a labour union causes to an unprofitabe company by striking, is ——– to only itself. They will be out of jobs completely.

Let that sink in.

It’s time to ignore the trade unions just like Margaret Thatcher… Let them strike. They are most of the time not productive and actually just a burden to society…

The ANC depends on the Union vote. Thatcher did not.

Your comment encapsulates our predicament.

LOOK WHAT SIBANYE DID – THEY LET AMCU STRIKE IN THE WAKE OF LONMIN PLC COLLAPSING – SIBANYE SAID GO AHEAD AND STRIKE…TODAY LONMIN WAS SAVED BY SIBANYE AND SIBANYE EVEN PAID THE STRIKING WORKERS THEIR ALLOWANCES DURING THE STRIKE. I SAY THIS AGAIN GUYS LET THEM STRIKE AFTER ALL UNIONS AND SAA MANAGEMENT ARE RESPONSIBLE…IT IS SAD THAT THE BOTTOM LINE GETS AFFECTED FIRST IN THIS INSTANCE BOTH NEED TO WORK AND TURN IT INTO PROFITABILITY. VIRGIN AIRLINES WANT TO BUY SAA IN A FULL ACQUISITION BUT SAA WOULD NOT SELL THE CARRIER. THAT MEANS IF VIRGIN WERE TO ACQUIRE SAA IN FULL THEY WILL REPLACE MANAGEMENT AND BRING IN THEIR OWN SKILLS AND TURN THE COMPANY AROUND AND EVEN RENAME IT TO virginSAA. THE STATE WILL NOT SELL THE FULL COMPANY IT STILL WANTS TO RETAIN POWER AND CONTROL STRATEGICALLY. UNTIL LENDERS GET FED UP AND START REPOSSESSING ASSETS ONLY THEN WILL THE FINANCIAL COLLAPSE BE EVEN MORE SERIOUS. LET THEM STRIKE

CAPS LOCK broken?

If SA is to stop its economic decline the unions will have to be confronted head on regardless of their threats. May as well be SAA that starts this. Hope the CEO has the gonads!

It’s not the CEO’s gonads that will be the deciding factor, rather the collective ANC and specifically Cyril and Pravin.

” …….and plan the ‘mother of all strikes’ in response.” standby for the burning and looting of airports and planes. Well tested union tactics of violence and intimidation …… works every time ….. and no one is responsible!!

There will be no swimming here the unions will see to that.

What are the odds SAA is closed before Christmas?

Everybody will be watching this battle closely to see who blinks first. Make no mistake. If the Unions win this round they will be emboldened to hold fast across all sectors. This is a test case!

Don’t hold your breath. At Eskom government couldn’t even agree to “no increases” let alone retrenchments. The unions have the ANC exactly where they want them and it is going to stay like that until pigs learn to fly.

Not that long ago NUMSA was also striking at ArcelorMittal. Why don’t they continue now.

These people need to go and sit around a table and come to an agreement that Socialism as a concept is dead and is responsible for the destruction we see. CR can also attend as he seems to be oblivious as to what is happening in the real world.

Have they got unions in Dubai? Has Dubai turned into the dump we turned into?

Use your brains man.

The unions are fighting for jobs that won’t exist! Once an airline is in such a precarious position and imminent issues are perceived, customers will tend to book flights with alternative/competitor airlines because of the uncertainty. No-one wants to be informed of a flight cancellation at the last minute. That spells the beginning of the end. One understands that SAA management are scrambling for solutions now but it’s truly too little, much too late. A very clear case of flogging a dead horse (it’s actually been decomposing for a while!). I would advise any SAA employee to get out ASAP.

Hear, hear Mmmmm. It has now become abundantly clear that most trade unions are a total obstruction to employment and economic success in South Africa.They care only for the fat dues they get from workers and pop up every few months to declare strikes which totally disrupt our economy. We lag behind Europe where they have (mostly) recognised the evil basis of trade unions i.e. Communism/Socialism. Communism is a dead duck, having destroyed (and been kicked out of) over 50 countries. Yet we still have a Communist Party in SA calling the shots. Why? And as for Socialism, the masses need to realise that ‘the government’ doesn’t supply the money, taxpayers do. And taxpayers in SA are becoming a rarefied species. Cue Thatcher’s famous remark: ‘Socialism is fine until you run out of other people’s money’. That’s where we are now thanks to ANC incompetents and the unions. Only hope for us is a stand-off. Hope CR has the cojones.

Seriously get rid of unions! My goodness, who do they think they are? They are so anti-economic growth its not even funny. Bunch of socialists!!

NUMSA and other unions should start injecting their own funds into these parastatal’s or just shhh.

Agreed ‘The Oracle 2’.
The problem is these ‘Union Members and folk’ do not know how to strike peacefully.
Mayhem and destruction will surely follow.

Perhaps what we need is a proper ruck – where those people who want to live in and build a united SA face off with those factions, tribes and “wings” which want to force their idiot ideologies down normal, hard working peoples throats. We are held hostage by militant, treasonous citizens, their unions who sabotage the lives of over 50 million people with their violent striking, threats and intimidation. Politicians do nothing, thereby aiding and abetting the destruction (somewhat predictable as one third of the ruling party is after – A UNION). Unions were established to protect the rights of workers, not to give workers the power to intimidate and threaten not only their employer but sabotage an entire country. They have become vehicles of influence and power and no longer represent the interests of workers in my opinion. If they did, they would be doing everything differently.

If unions keep pulling at this thread, they should expect it to unravel.

This is very difficult. How can you explain to the unions that their members must lose their jobs due to gross incompetence by senior managers and wholesale theft with irregular expenditure etc. Is it correct that a 46 year old single mother of two gets fired while that disgusting Dudu ran the place into the ground gorging her ample self at the trough with no consequences?

SAM doe snot like the unions-but why should junior low paid people have their livelihood destroyed when the fatcats get away with so much stealing? So any retrenchments should be conditional upon prosecution of the many, many criminals who stole the place into insolvency.

You are right SAM. This is difficult. No matter how you skin this cat. Why should the 46 year old single mother of two lose her income when the place was mismanaged by the ANC? She will be affected until she finds another job. In the same breath – why should every tax paying South African be affected for as long as SAA remains open? In any normal business those jobs would have been made redundant a long time ago, whether it was due to mismanagement or market decline is irrelevant in my opinion. No money, no business.

The voters will not get rid of the ANC no matter how much they steal, lie or cheat, and because we suffer from little voter common sense, we need to apply commercial common sense here and – can it. We can’t keep the ANC and SAA. They are now mutually exclusive. Same for Eskom, Denel, Prasa, SABC and all the other problem children of the South African economy.

“Labour unions have threatened a total shutdown of the airline, which could sink it outright.”

Please allow them to proceed … taxpayers like me are tired of throwing good money after bad.

ME TOO I CONCUR AS A TAXPAYER THEY CAN SINK IT AND EVERY OTHER SOE. ESKOM NUMSA SAID THEY WILL TURN THE COUNTRY INTO DARKNESS SHOULD THE PLANNED SPLIT GO AHEAD SO ESKOM IS NEXT ON SHUTTING DOWN

As brutal as this sounds, let them strike and close SAA down. Lock stock and barrel. It will save a lot on retrenchment packages, and give the unions and their members something to think about.

Next Eskom etc etc and the list goes on and on. It’s time that capital/business calls the shots. There is only so many straws that the camel can take….

Strange how with every strike, the Union Officials still gets paid. The workers are cannon fodder for the Unions busy with their powerplay and war games. It is the workers that get the short end of the stick.

Sell/privatise SAA and most of the other SOE’s. Adriaan Kruger’s recent article re the results of SOE’s shows just how much of a millstone they are for the SA economy.

As much as I agree with the comments re the destructive and self-serving mindset of the trade unions is SA, I see ‘SAM The Taxman’s’ point re management/govt having made a rod for their own backs.

In SA the road to political rights came via union rights and one of the biggest failings of the SA Govt (ANC) is that they have done nothing to lead the unions to a more mature place. They have rather exploited their relationship to cement power. Well the bite is being felt and the broader population bears the brunt.

Any takers…?

Who thinks gov’t will allow this to run it’s course and who says gov’t will give in to their demands as usual…?

I suppose it may already be late to save SAA, although that too was a foregone conclusion years ago already. I guess all we can do now is observe the unraveling of our SOE’s, starting with SAA, as the death knell rings and the consequences become felt by all citizens.

Learning of a retrenchment via the media isn’t ideal but SURELY anyone working for SAA or affiliate MUST have seen this coming over several years!
Pilots are highly skilled – was there not perhaps alternative employment at other airlines? Because it’s the welfare of the entire country at stake here.

The mother of all strikes… oh no. Now how are we going to fly around? We’ll be forced to rely on the dozen other international operaters and comair, all of who have far better customer service!!! It’s going to suck not having goats and chickens sitting next to me on longhaul flights. And the savings!!! How dare they force me to save money!!!

If SAA folds and gets bought out : GREAT! Who needs a national airline?

Problem is the strike won’t just take out SAA flights – all the airports will be brought to a stand-still. Partly passengers : partly protestors. Imagine the sight of a 747 tyre burning on a runway :/

A solution for the 100 000 workers that need to be let go at SOE’s:

1) Phase them out over time, say six months to a year.

2) Cut government salaries, they are overpaid by 33% in world terms.

3) Cross subsidize the laid -off workers with these savings.

Spare a thought for the workers, even if they are in artificial jobs. Every worker has five to ten dependants. The State has to let go of about 100 000 workers at the 700 SOE’s. Major social disruption can follow. Develop a kind of safety net to for those laid off.

Let me guess-a last minute deal with the unions by Jamnadas Gordhan and the taxpayer can bail SAA out again. BTW the acting CFO was on the radio this am-very capable man-he cannot last while Gordhan looks after the PARTY!

Labour costs accounts for 24% of turnover, and fuel 27%. There is little the airline can do to reduce fuel costs, which is why it is forced to look at reducing staff numbers. Management has identified non-core assets that could be sold to realise funds. The airline has also made progress in improving route profitability and identifying new routes under Chief Commercial Officer Philip Saunders.LABOUR COSTS 24% WOW THAT REPRESENTS THE SAME PUBLIC WAGE BILL EXPENDITURE WHICH IS AT A WHOPPING 35% AND GROWING. IT IS SAD THAT LABOUR COSTS ARE CLOSE TO WHAT FUEL COSTS…

Much like with Mandela, SAA is already dead but just on life support.

Once again the ANC will decide the timing of when to turn off the machines.

And will that timing coincide with the departure of the last gravy train from SAA’s boardroom?

Load All 39 Comments
End of comments.

LATEST CURRENCIES  

USD / ZAR
GBP / ZAR
EUR / ZAR
Insider GOLD
ONLY R63pm

Moneyweb's premium subscription is a membership service which will give you access to a number of tools to take charge of your investments.
Choose a yearly subscription at R630pa - SAVE R126

Get instant access to all our tools and content. Monthly subscription can be cancelled at any time.

Podcasts

NEWSLETTERS WEB APP SHOP PORTFOLIO TOOL TRENDING CPD HUB

Follow us:

Search Articles:Advanced Search
Click a Company: