SAA cannot pay salaries beyond April

South Africa Airways (SAA) does not have sufficient money to cover a significant part of its salary bill beyond the end of the month, say its business rescue practitioners (BRPs).

They have reemphasised the need for employees to take severance packages or see the airline being liquidated.

In a letter sent to creditors and labour on Thursday, BRPs Les Matuson and Siviwe Dongwana say that due to a lack of funding from the shareholder – which is government, represented by the Minister of Public Enterprises – to enable the rescue process and restructuring of the airline, they have been left with two choices: 

• Avoid liquidation through a wind-down process that involves reaching an agreement with all unions to terminate employment contracts and offer severance packages that would be funded by the sale of select assets. This would allow the business rescue practitioners to develop and publish a rescue plan.
• Alternatively, if they are not able to reach a mass employment termination agreement, the BRPs will file an urgent application to discontinue the rescue process and liquidate the airline. 

Unions and non-unionised representatives were provided with the collective agreement last Friday (April 17) and given until this Friday to accept it. The agreement states that all employee contracts for over 4 700 workers would be terminated by the end of April and the severance packages in question could be paid either in full or in part after a sale of assets over six to 24 months.

Matuson and Dongwana said the two scenarios would be the most responsible way to stop the operations of the airline.

Read:

Cash-crunched SAA proposes termination of employee contracts 

Unions respond to SAA severance package offer

The BRPs said requests for government to fund the immediate payout of severance packages have been unsuccessful. 

The company, which has been in business rescue since December, has gone through the R5.5 billion of post-commencement funding guaranteed by the state.

 In February, National Treasury extended another R16.4 billion to cover government debt and guarantees. It made no mention of money for the airline’s restructuring, which was costed at R7.7 billion and which government had agreed to. 

Read: SAA Technical asks workers to ‘sacrifice’ half their wages

In April the state told Matuson and Dongwana that it would not be able to grant them the R10 billion in funding, saying the government no longer had room to bankroll the airline. 

While the country has been under lockdown, the airline has been able to continue limited operations through the repatriation of foreign nationals to their respective countries. These flights will end by the end of the month.

“The lockdown remains in place and SAA has no funds to continue trading and cannot pay a significant part of the salary bill beyond April 2020,” said the BRPs.