Salary cuts at SAA to keep airline going until June

The proposal by the Department of Public Enterprises will apply to employees in all earnings brackets.
SAA has been in business rescue since December 2019 and the hopes of rescuing the airline have been dimmed by the Covid-19 global pandemic. Image: Waldo Swiegers/Bloomberg

The Department of Public Enterprises has asked employees at South African Airways (SAA) to take salary cuts of up to 50% (for the highest-paid employees) in order to keep the airline afloat for the next two months. 

The airline’s business rescue practitioners (BRPs), Les Matuson and Siviwe Dongwana, have previously told workers that SAA would not be able to pay salaries from May onwards, encouraging workers to take severance packages in order to avoid the liquidation of the airline. 

Sacrifices

The salary cut proposal will apply to May and June salaries and is meant to “mitigate” against the “constant threat of liquidation” according to the department’s proposal. 

These salary “sacrifices” will count as post-commencement funding the document states.

“This means in the eventuality of a liquidation, the shortfall of the salary of each employee will be a legitimate claim in the winding-up process in the form of a creditor.”

The salary cuts range from 3.7% for some of the lowest salary band of employees to 49.8% for the highest. 

Source: DPE salary cut proposal

Is there money? 

On May 3 the BRPs granted what they said was the final extension for workers to accept the severance packages which would be paid for through the sale of certain assets in a structured winding down of SAA’s operations. 

The deadline for organised labour to accept the offer was May 8, however, this was suspended indefinitely after the National Union of Metalworkers of South Africa (Numsa) and the South African Cabin Crew Association (Sacca) challenged the retrenchments at the Labour Court and won. 

Read: South African Airways rescue team to appeal court ruling on layoffs

Despite the court setting aside the retrenchments, SAA is still not in a position to pay salaries even as it continues to operate repatriation flights and cargo services. 

The BRPs who said the airline was out of cash, having spent the R5.5 billion given to it in post-commencement funding, had also intended to stop all operations from May 8. However, following discussions with Public Enterprises Minister Pravin Gordhan the decision was rescinded. 

On April 30 the BRPs placed all employees on unpaid absence effective from May where even employees who still had leave days would not be remunerated. Workers who were required to work on charter planes would only be remunerated for their time. 

Read: DPE and SAA rescue practitioners agree to work together

The company said it would apply for UIF Covid-19 unemployment benefits for it’s staff in SA. Matuson and Dongwana also warned that the unpaid leave of absence would not allow the company to continue perpetually because it’s still had to pay medical aid, insurance and other social benefits. 

BRP spokesperson Louise Brugman said that even with this new proposal to slash salaries nothing had changed regarding the leave of absence as SAA still does not have the money for salaries. 

R10bn in losses

Asked whether the government would provide a cash injection for the reduced salaries, department spokesperson Sam Mkokeli referred questions on staff remuneration to SAA. 

“The government will work with all the stakeholders in a genuine effort to restructure the business and create a financially viable airline,”. Mkokeli said. “Minimising job losses is one of the priorities.”

Matuson and Dongwana and the department signed a memorandum in which they agree to work together to formulate a business rescue plan and avoid liquidating the airline or selling off its assets.  

Mkokeli said the memorandum would enable “all parties to create a constructive environment and avenues to deal with a number of aspects, including those related broadly to the airline’s finances and assets”.

Part of this will involve the establishment of a finance workstream that will determine how much SAA has in savings and what minimum amount will be needed to keep the business afloat until June 30 as the government works on proposals for the final plan. 

Last week Gordhan told a joint parliamentary committee that proposals for BRPs and other consultants to take a cut of up to 40% in their rates had also been made. 

On Friday Gordhan, together with Matuson and Dongwana, will appear before the Standing Committee on Public Accounts (Scopa) in the National Assembly to provide an update on the rescue plans for SAA and SA Express which is now under provisional liquidation. 

Read: The race to save or liquidate SA Express

On Thursday evening the Democratic Alliance’s (DA) Alf Lees tweeted SAA’s draft financial statements that were tabled in Scopa which show that the airline made a loss of over R10 billion in 2018 and 2019. 

 

SAA has not released financial statements in two years and has not made a profit since 2011, relying on government bailouts to stay afloat.

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Well our Comrade Jamnadas sure does not give up. SAA loses R5bn a year pre Covid 19. How can it possibly come right post Covid 19?

Are these 5000 jobs so much more important than everyone else livelihoods?

Don’t come here with your capitalist tendencies. It’s clear you don’t understand that he’s antagonising at a grass-roots level for the proletariat to smash the bourgeoise by seizing the means of production.

Or some such drivel.

The only people that calls PG by his middle name are members of EFF. Every opportunity you slam PG.

Noticed the same thing…

now what will be the benefit for the ANC excluding smuggling of weapons, gold and money laundering

And just how special do these coffee-bean ladies and gents who push food trolleys up and down the isles think they are to only NOW agree to forfeit part of their fat, gravy-train, incomes and 13th cheques to save their own arses? Yes, NOW the penny drops; SA has no more downtrodden tax payers and poverty-stricken unemployed to bankroll this arrogant, conceited Cabin Crew Scumbags.

Why did they not think of salary cuts 10 years ago.

This is the same as giving CPR to the dead.

Obviously there are lots of family and friends earning exceptional salaries at SAA and feeding at the “honey pot”. Hence the reluctance to liquidate the airline. No wonder the ratings agencies now constantly downgrade S.A.

Well, now this is the perfect communist solution for the typical communist problem! When the inevitable happens and the business goes bankrupt, they want to protect jobs, so they take money from private businesses and taxpayers to throw at SOE employees. They kill sound businesses to save bad businesses. They destroy viable job opportunities to protect nonviable jobs.

Now they delay the inevitable at SAA by lowering the wage. This won’t save the airline so they will have to cut the wages further. Soon, like the interest rates in the EU and Japan, they will enter negative territory with the wage. The workers will pay to work at SAA, but at least they will still have a job.

‘Well, now this is the perfect communist solution for the typical communist problem!’ What a beautiful summation of the whole problem with Communism!
Take a bow, sir.

Any south african airline whatever form is making the rest of us poorer.

Did I see correctly: R500,000 PER MONTH? How many of those are in that outfit?

Considering the salary reductions only get serious above 50k/month and the savings cover a month’s ? 2 months’ ? payroll the organisation must be hugely top-heavy. Small wonder the unions want the focus to be on management cuts.

Considering the state of SAA, those individuals that are in that earning bracket are more than likely quite under qualified and heavily politically connected.

It would make interesting reading if they put employee numbers against the various salary bands.

Then do this for other SOEs.

I had to put my glasses to re-read that.
Irrespective of the volumes…. what do these people do to justify that Salary?
Its mind boggling.

Our country doesnt have a problem with growth potential… it has an unproductive workforce getting highly paid… same goes for Eskom.

On the subject of maintenance – one day one of these will drop out of the sky!!

Exactly the issue on my comment I raised a few days ago:

The union/employees may’ve won a Court case, but is pointless when there’s little money to continue pay salaries.

(Up to 50% cut now….later it will be “delayed” salaries for all staff).

Maybe there will be another bailout from Govt(?)….but I hope then they reduce SASSA payments to compensate. This Govt is a miracle, if they reallocate money for SAA….with SARS collections severely impacted (lower PAYE & VAT)…and wait for disappointing PROV-tax figures come 31 August. Govt will be glad it didn’t bailout SAA.)

Any other airlines getting any help? Even with salary cuts SAA still needs Tax payers cash to pay them.

My point still stands, this is the ANC force bankrupting all the others but keeping SAA on life support. When the others are dead and buried SAA will pop up as the only airline.

We will have no choice but to use SAA locally. One or two international airlines may still be available for overseas travel if not it will have to be SAA or a mail boat, as they did in the 60’s.

Hallelujah,let’s drink to that folks; FINANCIAL STATEMENTS – be it in DRAFT form!
SAA and its minister have truely EXCELLED! Our ANC/SACPbrotherhood have just proved why they deserve to once again, till Jesus comes,win at the polls..
I, for one, don’t fly with an airline – risen from ashes, the grave, or whatever – that manages no more than DRAFT statements after TWO whole years!

End of comments.

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