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SAA ends operations over bailout denial, $1.4 billion losses

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South African Airways

South African Airways (SAA), may have reached the end of the line and now at the verge of liquidation following the rejection of another bailout request.

The National Transport Movement (NTM), said a decision to shut down SAA and form a new airline had been reached. The union said the plan was confirmed during recent meeting between SAA’s unions and Public Enterprises Minister, Pravin Gordhan.

The collapse would make way for a new national carrier; one which it is hoped will provide jobs for about 5,000 workers, who are set to lose out with the closure of SAA.

The national carrier was denied further funding by the South African government-owner as the airline looks for ways to recover from the coronavirus crisis and a local form of bankruptcy protection.

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SAA, which began operations in 1934, has racked up 26 billion rand ($1.4 billion) in losses over the last six years, and has depended on a series of state bailouts to keep operating. The grounding of all passenger flights, aside from charters to repatriate stranded citizens, due to the coronavirus lockdown have further decimated its revenue stream.

Discussions that earlier took place between the Public Enterprises Department, SAA’s rescue practitioners, and workers unions suggested that the airline was on the verge of being liquidated.

Business Rescue Practitioners (BRPs), Les Matuson and Siviwe Dongwana, previously planned to liquidate the airline and had issued a deadline of the April 24 for workers to choose between terminating their contracts or liquidating the airline. However, they put this on hold until May 8.

In a statement, NTM president Mashudu Raphetha, said: “It is with great regard that after having had the meeting with the minister, the new airline will be born out of SAA. We have tried our level best to ensure that the airline still flies and we need to participate in the formation of the airline in order to keep most jobs.”

Although the message from NTM is clear, the same message doesn’t seem to have filtered through to the unions. The National Union of Metalworkers of South Africa (NUMSA), and the South African Cabin Crews Associations (SACCA), who jointly represent the bulk of the airline’s 4,700 employees, seem convinced that the government will swoop in with an eleventh-hour rescue package.

The two unions lately released a joint statement urging members not to sign the retrenchment agreements proposed by the BRPs. They accused Matuson and Dongwana of spreading “misinformation and emotional propaganda,” saying that workers are facing “undue pressure” to sign the agreements.

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In the statement, the unions complain about, “The undue pressure these persons are placing on employees during this period of uncertainty and anxiety to sign hollow and conditional retrenchment agreements, tantamount to workers being forced to essentially relinquish their rights.”

The unions last Wednesday said the next few days were critical in their mission to save SAA. Indeed, workers have been given until May 8 to sign the agreements. All of the 4,700 employees need to sign the agreement to terminate their contracts; if they do not, the BRPs will be forced to undertake immediate liquidation procedures.

With the termination contracts unsigned, SAA workers will forgo any severance pay. To claim their wages and any other pay they are owed, these people will be forced to join the queue behind other creditors of the airline. NTM has strongly recommended workers sign the agreement by May 8.

Finance Minister, Tito Mboweni, has long advocated shutting off funding for the airline, and earlier this month cited the carrier’s closure as a way to save funds as the country deals with the fallout of the coronavirus pandemic. Even before the Covid-19 outbreak ground global travel to a halt, the administrators had cut routes and started consultations with more than 4,700 employees about job losses.

The Department of Public Enterprises said Friday; it wants to create a national carrier that’s both publicly and privately owned, profitable and able to serve South Africa’s trade connections.

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