Unions respond to SAA severance package offer

Labour representatives at South African Airways (SAA) have given a mixed response to the severance package proposal by the airline’s business rescue practitioners (BRPs). 

On Friday SAA’s unions received a draft settlement agreement offer open to all of SAA’s 4 708 employees that would see the termination of their employment contracts by April 30 in exchange for unguaranteed severance packages. 

Read: Cash-crunched SAA proposes termination of employee contracts

At least one union has put out a counter-offer to the proposal with the aim of saving some jobs, others are consulting lawyers about the implications of signing the agreement, and two unions have distanced themselves from the process altogether. 

The airline’s five-month business rescue attempt has been crippled by funding challenges that were exacerbated by the unprecedented global response to the Covid-19 pandemic. With countries instituting travel restrictions, airlines across the world were forced to ground their aircraft.

Agreement lifeline for labour

The R5.5 billion in post-commencement funding the airline received at the start of the rescue process has run out.

The proposal for severance packages comes after Public Enterprises Minister Pravin Gordhan told business rescue practitioners (BRPs) Les Matuson and Siviwe Dongwana that their request for a further R10 billion to sustain the process would not be approved – a move that seems to have signalled the impending end for the airline.

Without funding from the government, the BRPs have no choice but to wind down the business to avoid liquidation.

In a liquidation, some of SAA’s creditors’ claims would take preference over employees.

The mutual agreement to terminate employment with defined retrenchment benefits may be in the best interests of SAA’s employees, as it would be secured ahead of the creditors should a liquidation become necessary.

For those who do not accept the agreement, the current Section 189 retrenchment process will continue.

‘Appalling proposal’

Deputy president of the South African Cabin Crew Association (Sacca), Advocate Christopher Shabangu, has “completely distanced” the union from the draft agreement. Shabangu said he was surprised to see the union’s name on the document, because neither it nor the National Union of Metalworkers of South Africa (Numsa) have ever been involved in the “sham” Section 189 process. 

Sacca and Numsa have been vocal about not participating in the retrenchment process, accusing the BRPs of not constructively engaging with labour on the process, as Matuson and Dongwana had reportedly not given them a clear plan for the airline’s restructuring. 

Read: SAA and labour to resume talks over retrenchments

Shabangu said the two unions are now engaging the shareholder (government), represented by the Minister of Public Enterprises, on alternative plans to save the airline. 

“The [BRPs] are asking that R10 billion should be put in without a clear plan – it’s carelessness,” he said, adding that the rescue practitioners should excuse themselves because they have failed and have not shown any attempt to rescue the business. 

He said the union would not place a counter-proposal on the table and described the severance package proposal as an “appalling” document that served to threaten workers and create anxiety instead of dealing with how to rescue the airline. 

Shabangu said there was no concrete severance package in the offer – instead it is “a promise” of packages if the airline sells selected assets in the next 24 months.

“We don’t even know the claimants that they have and how much money they will make out of the sale[s],” he said.

“We cannot make [counter] offers on the basis of such a flimsy proposal.” 

On the other hand

The National Transport Movement (NTM) is the first union to issue a counter-proposal, which its president Mashudu Rapheta said would realise a “drastic drop” in the airline’s expenditure, securing its future and many jobs. 

NTM’s proposal calls for the insourcing of all services such as cleaning, bag handling and bus services from aircraft to the terminal, which it says will realise savings of about R10 million. In addition, the union has called for the transfer of some employees to SAA subsidiaries such as Mango Airlines. 

The union has also called for the cancellation of all fixed-term contracts and consultant agreements by April 30.

Where job cuts are necessary, NTM suggests that early retirement be granted to all employees over the age of 55 with an added incentive like a six-month salary. It says the company could also explore retirement for those employees who are 50 years old and have been at the airline for 25 years. Voluntary severance packages should be offered to the rest of the staff of SAA by giving them three weeks’ remuneration for every year employed.

But Solidarity’s chief executive Dirk Hermann said that while proposals around selection criteria and alternative ways to avoid retrenchments have merit, the situation at the airline has gone past that as an option. 

Read: SAA could face liquidation as state funding dries up

“The fact that they are suggesting an agreement in this type of format, on face value it shows that they do not have the money to even pay employees,” said Hermann. 

“If they had the money we would have continued with the Section 189 process, because on conclusion there would be money for retrenchment packages.” 

In a letter to creditors, Matuson and Dongwana said restructuring the airline would cost at least R7.7 billion. This would cover the costs of concurrent creditors, restructuring, recapitalisation, and the retrenchment costs. 

Payment uncertain

Solidarity, along with the South African Airways Pilots’ Association (Saapa) and the South African Transport and Allied Workers Union (Satawu), are going through the proposal with their legal teams. 

With no money from the government, the severance packages of SAA’s employees would be dependent on whether the company is able to sell some of its assets – such as property, aircraft parts and its trade debts – within six to 24 months.

The severance package will include one week’s pay for every year of service, a month’s salary, payment for outstanding leave, and a 13th cheque if an employee is entitled to one. 

Employees have until Friday to accept the agreement to terminate contracts by April 30. 

Saapa said it is concerned about the proposal, which would remove all collective agreements and the rights of labour in any revitalised SAA.

“It is a very weak and uncertain offer for labour, who will end up out of work for possibly more than a year before any severance payments will be forthcoming,” said Saapa.

“Nor is there any real certainty of how much severance pay labour will ultimately receive.”

SAA’s ability to cover the full cost of the severance packages is also dependent on whether it can sell the assets at a value that will be able to cover the packages. Once such sales are concluded, the packages would be paid on a monthly basis for six months. Should the company not be able to do this, employees will receive a proportionate amount of their package and can sue the company for any outstanding money.

“It is disingenuous of the company to hold a gun to labour’s head with the threat of imminent liquidation to take the deal or [get] nothing attitude,” said Saapa.

With no mention that government may foot the bill for the retrenchment packages, the union said it would be “very disheartening” if the shareholder would allow nearly 5 000 workers to be retrenched with no money at the moment and the possibility that the money promised from the sale of assets may not materialise.

On Saturday the Department of Public Enterprises responded to reports about the severance package proposal by reiterating its commitment to “a dynamic and viable aviation sector”.

It also made it clear that no agreements to “full-scale retrenchments” had been concluded.

Gordhan is expected to present a report on the airline to President Cyril Ramaphosa and his cabinet on Monday.