Salary cuts at SAA to keep airline going until June

The Department of Public Enterprises has asked employees at South African Airways (SAA) to take salary cuts of up to 50% (for the highest-paid employees) in order to keep the airline afloat for the next two months.

The airline’s business rescue practitioners (BRPs), Les Matuson and Siviwe Dongwana, have previously told workers that SAA would not be able to pay salaries from May onwards, encouraging workers to take severance packages in order to avoid the liquidation of the airline.

Sacrifices

The salary cut proposal will apply to May and June salaries and is meant to “mitigate” against the “constant threat of liquidation” according to the department’s proposal.

These salary “sacrifices” will count as post-commencement funding the document states.

“This means in the eventuality of a liquidation, the shortfall of the salary of each employee will be a legitimate claim in the winding-up process in the form of a creditor.”

The salary cuts range from 3.7% for some of the lowest salary band of employees to 49.8% for the highest.

Source: DPE salary cut proposal

Is there money? 

On May 3 the BRPs granted what they said was the final extension for workers to accept the severance packages which would be paid for through the sale of certain assets in a structured winding down of SAA’s operations.

The deadline for organised labour to accept the offer was May 8, however, this was suspended indefinitely after the National Union of Metalworkers of South Africa (Numsa) and the South African Cabin Crew Association (Sacca) challenged the retrenchments at the Labour Court and won.

Despite the court setting aside the retrenchments, SAA is still not in a position to pay salaries even as it continues to operate repatriation flights and cargo services.

The BRPs who said the airline was out of cash, having spent the R5.5 billion given to it in post-commencement funding, had also intended to stop all operations from May 8. However, following discussions with Public Enterprises Minister Pravin Gordhan the decision was rescinded.

On April 30 the BRPs placed all employees on unpaid absence effective from May where even employees who still had leave days would not be remunerated. Workers who were required to work on charter planes would only be remunerated for their time.

Matuson and Dingwana also warned that the unpaid leave of absence would not allow the company to continue perpetually because it’s still had to pay medical aid, insurance and other social benefits.

BRP spokesperson Louise Brugman said that even with this new proposal to slash salaries nothing had changed regarding the leave of absence as SAA still does not have the money for salaries.

R10bn in losses

Asked whether the government would provide a cash injection for the reduced salaries, department spokesperson Sam Mkokeli referred questions on staff remuneration to SAA.

“The government will work with all the stakeholders in a genuine effort to restructure the business and create a financially viable airline,”. Mkokeli said. “Minimising job losses is one of the priorities.”

Matuson and Dongwana and the department signed a memorandum in which they agree to work together to formulate a business rescue plan and avoid liquidating the airline or selling off its assets.

Mkokeli said the memorandum would enable “all parties to create a constructive environment and avenues to deal with a number of aspects, including those related broadly to the airline’s finances and assets”.

Part of this will involve the establishment of a finance workstream that will determine how much SAA has in savings and what minimum amount will be needed to keep the business afloat until June 30 as the government works on proposals for the final plan.

Last week Gordhan told a joint parliamentary committee that proposals for BRPs and other consultants to take a cut of up to 40% in their rates had also been made.

On Friday Gordhan, together with Matuson and Dongwana, will appear before the Standing Committee on Public Accounts (Scopa) in the National Assembly to provide an update on the rescue plans for SAA and SA Express which is now under provisional liquidation.

On Thursday evening the Democratic Alliance’s (DA) Alf Lees tweeted SAA’s draft financial statements that were tabled in Scopa which show that the airline made a loss of over R10 billion in 2018 and 2019.

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