SAA BRPs to begin employee consultations on job cuts

Press release from Joint SAA Business Rescue Practitioners, Les Matuson and Siviwe Dongwana

The joint BRPs today announced that South African Airways SOC Limited (“SAA”) has issued a notice advising its employees of the intention to begin imminent consultations in terms of section 189 of the Labour Relations Act 66 of 1995. The notices of consultation were issued to all the recognised unions in SAA for employees and management. These include SAAPA – South African Airways Pilots Association, NTM – National Transport Movement, NTM Management Forum, SACCA – South African Cabin Crew Association, SATAWU- South African Transport and Allied Workers Union, Solidarity, AUSA – Aviation Union of South Africa and NUMSA – National Union of Metalworkers of South Africa.

The BRPs have been engaging with the unions, most recently over the past weekend, in relation to this process and the intention to begin the consultation process.

“Our intention has always been to preserve as many jobs as possible through this process while still focusing on having a sustainable airline and platform for growth”, noted the joint Business Rescue Practitioners.

SAA has experienced numerous financial and business challenges, and cumulated losses of some R26bn over the past six years. Load factors on the airline have declined steadily from August 2019 to a low of 71% in January 2020. Forward sales have also declined significantly with all markets showing negative or minimal growth, within a very competitive market. The recent marked decline in travel due to the COVID-19 virus will further exacerbate matters.

The impact of the events that have occurred in the past few months which include the lack of funding, the grounding of SAA aircraft by the SACAA in October 2019, the eight-day strike in November 2019 followed by SAA being placed under Business Rescue in December 2019 and the subsequent withdrawal of travel supplier insolvency cover, which was reinstated in February 2020, all had a significant negative impact on SAA’s Revenue. The overall result has seen a decline of R1.3bn in revenue with the cost base that remains more or less flat.

The changes required at SAA are therefore both structural and economic. They are urgent if liquidation is to ultimately be avoided in which event all employees will lose their jobs.

To avoid this scenario and to build a commercially viable business the BRPs propose a fundamental restructuring of its business such that it can best meet market demands and operate as a sustainable African airline. The current structure negatively affects the efficient operation of the business and, in turn, its profitability and sustainability.

To achieve these goals the strategy is to reduce loss making services and increase efficiencies, which will see a reduction in the aircraft fleet as well as services and route flow.

We wish to confirm that this process involves the employees of SAA and not those of its subsidiaries, Mango, SAA Technical and Airchefs.

Reduction in headcount

The proposed restructuring will necessitate a reduction in jobs. The section 189 process is applicable only to employees based in South Africa. The process for all other employees elsewhere in the world will be managed in line with the labour laws of their respective countries. Employees will be selected for positions within the new structure based on service length (LIFO), skills, qualification and experience in respect of the job categories indicated, taking into account employment equity objectives.

The BRPs contemplate that all 4,708 employees will be affected and the number of jobs that will exist in the restructured organisation will be the subject of consultation process. Significant changes to conditions of employment, including remuneration and benefits, appear unavoidable and will be sought by agreement.

The success of the proposed restructuring cannot be successfully implemented without the agreement of the collective bargaining representatives of the employees (the Unions) as well as on the availability of funding to support the plan. The scope of the contemplated organisational restructure encompasses SAA airline in its entirety.

The joint BRPs’ commented: Regrettably, this restructuring exercise, if implemented, may lead to positions being declared redundant across various job categories and in significant numbers. This may, in turn, result in the dismissal of employees employed by the Company, for operational reasons”.

A number of alternative options have been considered, including potential consolidation of management structures, reducing fixed term employees, accelerating the Long-Term Turnaround Strategy, changing of scope in certain procurement contracts and the early termination of certain procurement contracts amongst others. “None would however, assist SAA in achieving all of its required operational efficiencies,” noted the BRPs.

Consultation process

The Company has, in accordance with the provisions of section 189A of the Labour Relations Act, elected to apply for the appointment of a CCMA facilitator to guide and assist the parties during the consultation process. The BRPs will also consult with elected representatives from non-unionised managers and non-unionised non-management employees.

The initial consultation will be held on 12 March 2020. The sixty day (60) consultation process in terms of section 189A of the Labour Relations Act will end on 8 May 2020 and accordingly the consultative process will be finalised by 8 May 2020.  An expedited consultation process ending by no later than 8 April 2020 has been proposed in an effort to avoid liquidation.

It is essential that this process achieve an agreement between the Company and the Unions that will be communicated to the creditors and the lenders as part of the Business Rescue Plan, if the Business Rescue Plan is to be approved and liquidation avoided. The Business Rescue Practitioners believe that if this is achieved, SAA will be sustainable and the future of SAA can be ensured, without further fiscal assistance.

The BRPs have been engaging with various parties including the UIF in relation to alternatives that will be considered as part of the consultation process which include, training and lay off schemes.

“We must emphasise that no final decisions have yet been taken, nor will any final decisions be taken until we have exhausted consultation and hopefully reached agreement,” concluded the BRPs’.

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