DPE and pilots pull in different directions ahead of critical vote on SAA rescue plan

The Department of Enterprises has drawn a line in the sand on generous retrenchment packages to pilots at  South African Airways (SAA), accusing them of wanting to extract more money from the airline’s restructuring process.

The stalemate between the two came to a head over the past week after the South African Airways Pilots’ Association (Saapa) tabled an alternative voluntary severance package (VSP) proposal instead of fully endorsing the current packages as outlined in the rescue plan. 

The extent of the fallout has even seen the DPE’s acting director-general Kgothatso Tlhakudi, threatening to go to court to ensure that an agreement which regulates the terms and conditions of the pilots’ employment, and has been described as onerous and burdensome, is not transferred into the new airline, according to a letter seen by Moneyweb. 

Greed or fair? 

In the latest salvo on Monday afternoon, the DPE accused Saapa of trying to “squeeze the last resources out of SAA” with its proposal that will see an increase in the number of workers retained at the restructured airline while improving the VSPs to incentivise workers, particularly pilots, to accept them. 

“In reality, these proposals are motivated by greed, it transfers a financial burden to a new airline that must emerge from the business rescue process and it motivates for pilots to hold on to historic benefits at the cost of all other SAA employees,” said the department in a statement. 

The rebuke comes as Saapa plans to table its alternative proposal before the creditors meeting on Tuesday, where a vote on the rescue plan is due to take place. Saapa wants their alternative proposal to be incorporated into the rescue plan, a proposed amendment which could result in a second postponement on the vote. 

Read: Vote on SAA rescue plan postponed to July 14

The VSPs, which rescue practitioners Les Matuson and Siviwe Dongwana have offered to workers, will see 2 700 workers at SAA leaving with packages that include one week’s pay for every year of service, a month’s notice pay, leave payout, and a 13th cheque. No worker will receive less than R200 000. 

Of the remaining workers, 1 000 will remain full-time employees in the new airline while another 1 000 will be placed on a training layoff scheme only having their basic security package paid out by the company. The BRPs have said that they will assist workers with obtaining alternative remuneration from the Unemployment Insurance Fund. 

On the other hand, Saapa proposes that only 1 548 workers be retrenched resulting in 3 099 employees being retained. Of those, 2 000 workers will be employed by the airline at the start, while 435 will be placed on a temporary layoff scheme with the remaining 664 on furlough. 

The retained workers will be kept on a part-time basis of 75% of their original hours while receiving payment for those hours. Furthermore, pilots will receive a 20% cut in their salaries while other employees will get a 10% cut. As the airline begins to stabilise financially remuneration will gradually increase.

Due to the reduced number of employees being retrenched the proposal on VSPs will improve with the entire proposal costing R1.98 billion as opposed to R2.2 billion budgeted for by the government for the current plan.

Saapa has said that the current VSPs were “illogical and unfair” because they provided workers who earn less and have fewer years of experience with more than what is legally entitled to them compared to someone with double the pay and years of experience. In particular, Saapa said there was no incentive for pilots to accept the VSPs as pilots would receive the “bare minimum” of what is required under a forced retrenchment process. 

Misleading 

The DPE has called the pilots’ proposal “misleading” and instead of being beneficial to all workers, it’s “more lucrative and financially rewarding to themselves than any other class of employees at the airline”.

“The DPE wishes to put it on record that the 600 SAA pilots make up 13% of SAA staff, and yet they consume 45% of the wage bill,” it said. 

“The lowest [ranked] of SAA’s 170 senior pilots earn R3.6 million a year, excluding perks and incentives. Of the R2.2 billion proposed budget for the VSPs, pilots will get more than R1 billion.”

The DPE first rejected the pilots’ proposal after a bilateral meeting on July 3 where they presented the plan. In a letter to Saapa outlining the department’s response position, Tlhakudi told the pilots that adopting their proposal would not be “prudent” in a Covid-19 environment where economic recovery is uncertain. 

Tlhakudi further said that what savings the airline would achieve in labour costs should be used to create a sustainable airline and not to “enhance severance packages to satisfy higher-earning employees”.

“The high internationally-aligned salaries and benefits of the pilots have been entrenched by the Regulation Agreement (RA) which you have consistently refused to do away with despite an escalating financial crisis over the last ten years for SAA and even now when the company is in business rescue and on the brink of liquidation,” he told the pilots.

Historic benefits

The  RA is an evergreen collective agreement which regulates the terms and conditions of the Pilots’ employment with SAA. The deal first entered into in 1988 provides for certain perks and benefits that have been described as burdensome by government and other unions over the years.

The agreement also contains a provision on successorship which stipulates that the policy should remain in full operation in the event of a change in ownership of the company due to “purchase, sale merger, consolidation, acquisition, leasing of the operation, reorganisation, arrangement for the benefit of creditors or bankruptcy”.

Moneyweb has also seen another letter from Tlhakudi to the pilots dated July 7 which reveals that relations between government and the pilots deteriorated even further after Saapa met with Public Enterprises Minister Pravin Gordhan and DPE officials to discuss the department’s rejection of its proposal. 

Tlhkaudi accuses the pilots of not bargaining in good faith at the meeting which was supposed to “bridge the gap” between the two parties. 

According to Tlhakudi, in addition to refusing to take up a “magnanimous” offer by Gordhan to further discuss the impasse with DPE officials, Saapa had, in the meeting “made assertions about nefarious agendas in certain quarters to damage Saapa’s standing”. 

He pressed the point that the pilots’ proposal would only advance the interests  of “exorbitantly-remunerated” pilots. 

“Please be assured that the DPE shall not stand idle as you seek to entrench the privileges that you have undeservedly extracted out of SAA since the [RA] was put in place in the last years of the apartheid state.”

“If it needs be, the DPE shall deploy all means at its disposal to ensure that the future of the restructured airline is not sabotaged by the retention of the RA, including legal action if necessary.”

Saapa has said that it would not discourage workers from accepting the current VSPs. 

Saapa and the DPE did not respond to requests for comment by the time of publishing.

Source: moneyweb.co.za