SAA: The straw that broke the camel’s back

Just weeks after the National Union of Metalworkers of SA (Numsa) achieved its ‘victory’ over South African Airways (SAA), scoring a 5.9%, wage increase, the national carrier has been placed under business rescue.

Numsa and the South African Cabin Crew Association (Sacca) were on strike for eight days over wages and possible retrenchments. This forced the already financial burdened airline to ground several flights and resulted in bookings being cancelled, among its other problems. According to SAA, the strike cost it R52 million a day.

The cash-strapped national career had been in a dire state since 1999 due to mismanagement and government interference. It last released annual financial statements two years ago.

The strike created the perfect storm for the airline to go into business rescue after it had been considering it for about three months.

Jannie Rossouw, professor of economics and head of the School of Economic and Business Sciences at the University of the Witwatersrand, says though SAA has had financial problems for years, the strike was “the straw that broke the camel’s back”.  

“The strike action definitely forced the government’s hand on this one and they went into business rescue, so trade unions should be careful in their demands,” says Rossouw. “This is a very serious lesson.”

In a statement released on Sunday, Minister of Public Enterprises Pravin Gordhan said the strike had damaged the airline’s reputation and that it would need to go through “radical restructuring” to ensure its operational sustainability.

Funding process interrupted

SAA was in the process of trying to secure a R2 billion loan with a government guarantee in order to keep it in the air, which is what lenders were looking for in their recent negotiations with the airline.

Then the strike action hit, causing a delay in initialising the required R2 billion and at the same time increasing the amount of money needed.

The strike escalated SAA’s problems in the following ways:

• It caused jitters in the market and among passengers;
• As news of the liquidity crisis rippled through the aviation and allied markets, insurance companies began to cancel their underwriting of SAA tickets. International insurance companies also cancelled their underwriting of SAA tickets.
• The airline began to see a massive decline in new bookings.

For their part, the unions have yet to respond to the news of the airline going into business rescue. Numsa said it would put out a statement on the issue and Sacca also said it would address the matter later. At the time of publishing, neither union had responded to Monyeweb’s queries.

Meanwhile, SAA’s financial difficulty has left both its staff and passengers in a bind. The carrier battled to pay its employees in November – paying staff 50% of their salaries on time and the balance a few days later, and has accepted payments for tickets it might not be in a position to honour. 

Listen to Duduzile Ramela’s interview with lawyer Ulrich Roux, director of Ulrich Roux and Associates: