South Africa aiming for new viable airline from SAA business rescue

The South African government will work with unions to ensure that a new financially viable and competitive airline emerges from South African Airways (SAA) business rescue process, the Public Enterprises Ministry said on Tuesday.

The airline entered a form of bankruptcy protection in December, since then it has had to suspend all commercial passenger flights due to the global coronavirus pandemic.

In a virtual meeting with labour unions, the Inter-ministerial Committee on SAA reiterated that the government was not in a position to provide more capital to the state-owned airline, the ministry said in a statement.

Last week, the government told the airline’s administrators that it would not provide more funds, lending guarantees or allow foreign financing of a business rescue plan.

“The Unions agreed that in arriving at a solution for SAA, some jobs will be lost, and that employees that remain behind will need to sacrifice some of the unaffordable arrangements that had worsened the airline’s financial position,” the ministry said.

“It was agreed that social plans will be developed to cushion the effect of losing jobs on the affected employees.”

A proposal by the airline’s administrators, seen by Reuters last week, said SAA’s entire workforce of around 5,000 workers would have their employment terminated by mutual agreement on April 30.

They would be entitled to one week’s pay for every year of service, one month’s pay in lieu of notice pay and pay for outstanding annual leave. The proposal said it seemed “unlikely that the company will be successfully rescued as a result of the business rescue process.”

SAA has not been profitable since 2011 and has received more than 20 billion rand ($1.1 billion) in bailouts in the past three years, becoming a drain on public resources at a time of weak economic growth.