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Department of Public Enterprises media statement:
The Department of Public Enterprises (DPE) welcomes the vote in favour of a business rescue plan for South African Airways (SAA) and applauds creditors and all stakeholders for realising that a new, restructured, competitive airline, born out of the old, is the best option to immediately take back to the skies and preserve the brand of a national carrier.
The DPE believes that the favourable vote is a much better outcome for creditors and SAA employees than liquidation, and government remains confident that the implementation of the business rescue plan will balance the rights and interests of all parties.
The priorities for the DPE are now give effect to funding commitments by government for the business rescue plan, appoint a new, and reconfigured interim board for SAA.
The Interim CEO will be Mr Philip Saunders, an experienced airline executive with a strong commercial background, and he will work closely with the interim board to appoint an interim management team that must implement a fundamental restructuring of SAA led by the new interim board.
In supporting the plan, the government is committed to mobilising the necessary resources to fund the transition. This includes the Voluntary Severance Packages (VSPs) agreed with the unions, and meet the minimum requirements of the Labour Relations Act and Basic Conditions of Employment Act.
The department hopes that a new SAA can reclaim market share, while fighting to compete more in the emerging market space – notwithstanding the impact of the Covid-19 pandemic that will to constrain the aviation industry for some time into the future.
The SAA shareholder appreciates the level of commitment and cooperation from unions and staff representatives who have accepted fair and reasonable severance packages in the interest of their members, at a time when the devastating consequences of the COVID-19 pandemic are causing thousands of job losses in the global aviation industry.
Remarks by Kgathatso Tlhakudi, Acting Director General of the Department of Enterprises at the South African Airways SOC Limited Creditors Meeting on 14 July 2020
I wish to start my remarks by stating that the restructuring of SAA is a project that has been taken on behalf of the democratically elected government.
The project has been reflected in some quarters as a vanity project of the Department of Public Enterprises or that of National Treasury. This is far from the truth. The reemergence of SAA is good for the country, as we will explain.
The process has been undertaken in a responsible manner to ensure a balance in attaining a financially and commercially sustainable and viable airline, and minimising the negative social impact of a restructuring process.
Towards this objective, the government and Business Rescue Practitioners (BRPs) brought credible internationally well regarded resources to assist with the provision of expertise required to make a success of this effort.
Support of organised labour
On the local front, we were humbled by the support of organised labour. The support we received from the National Transport Movement, South African Transport and Allied Workers Union (SATAWU), Aviation Union of Southern Africa, Solidarity, the National Union of Metalworkers of South Africa, the South African Airways Cabin Crew Association (SACCA), and representatives of SAA non-unionised managers and ground staff, is highly appreciated.
Aims of new SAA
We believe that an example for a responsible business transformation process has been set for the South African public and private sector. The parties entered the process understanding everyone will have to give in a little to attain the bigger picture. SAA taking to the skies is important for the country and the region to achieve the following:
- Provision of essential air services for the repatriation of South Africans stranded in other parts of the world, and flying of critical medical supplies was made possible because we had SAA.
- We could not rely on other countries’ carriers as they were grappling with the emergency brought on by Covid-19.
- The integration of the region is dependent on an effective air route network due to the large distances between our economic centers. Anyone that does business in the subcontinent can attest to this.
- The national economy is dependent on international investment and trade, and air connections are critical in ensuring that South Africa, remains on the sights of foreign investors
- We have a beautiful country that is dependent on international tourists for its viability. Further, there are many people in this sector that derive their livelihoods from people taking their time to visit our country.
The Department of Public enterprises appreciates the level of commitment shown by the various stakeholders towards a sustainable SAA and in turn the continued operation of the broader aviation industry in the country and surrounding neighbours.
We believe that the restructuring that is being proposed for SAA is fundamental and will create a solid base for the emergence of a competitive, viable and sustainable national airline for the Republic of South Africa.
The restructuring is different from previous attempts at turning around the business. The old way of contracting for labour and services is being departed from. Productivity and efficiency will guide the performance system going forward.
We need an SAA which will emerge from this restructuring and its subsidiaries to be attractive assets that will attract strategic equity partnerships and other business partners. This has been reflected in the approaches that Government has received from local and international investors and players.
I wish to point that the process of appointing a transaction advisor to tie up the initial engagements that Government has had with prospective strategic equity partners is being concluded, and not too long a time we should announce the preferred SEPs for SAA group, and its various business units.
The new SAA will be a worthy partner to those that choose to support the process that is represented by the business rescue plan that is being put before the creditors committee this afternoon.
We are saying to competitors, business partners, suppliers, and customers represented in this room that your patience in process that has taken 7 months so far shall be rewarded by better business going forward.
The Government in ensuring viable restructuring process and has been responsible in developing a social plan, which is unique feature of this undertaking. An important feature is the temporary layoff scheme that will ensure that an additional 1000 employees can be retained.
The business model has catered for a responsible ramp up of operations in response to the pandemic trajectory, which is due to peak in South Africa between August and September 2020. The base established will ensure a firm foundation for growth going forward.
In this regard, the Cabinet has expressed its support for the concerted effort to mobilise funding from various sources to finance the business rescue plan, including from potential equity partners for the uptake of the new airline.
In the coming days the DPE will be announcing an Interim Board of the New SAA. The interim CEO for the airline will be Phillip Saunders, who has a credible track record of leading airlines around the world, and his last position before joining SAA was at IATA.
Lastly the Government of South Africa has made a prudent choice of restructuring SAA. The funding that will be sourced to shore the business is a critical investment in ensuring this end of the world destination country continues to be well serviced.
We ask that all stakeholders gathering here today to vote in favour of the business rescue plan as this is the only realistic pathway to ensuring a new national carrier emerges from the business rescue process.
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