Government is concerned the business rescue plan for SAA has not “adequately achieved” its objectives, but says it supports the plan “where it results in a viable, sustainable airline that provides integrated domestic, regional and international flight services”.
“We will assess the plan which, we are concerned, might have not been adequately accomplished,” says a rather cryptic statement by the Department of Public Enterprises, issued hastily on Wednesday morning after SAA business rescue practitioners Siviwe Dongwana and Les Matuson published their plan late on Tuesday night. DPE spokesman, Sam Mkokeli, was not immediately available to clarify what in particular Government was unhappy with.
The BRP proposes to retrench all but 1 000 employees whose employment terms would be renegotiated. This appears to be a sticking point as the statement stresses that Government expects the BRPs to “embrace” labour consultations between the DPE and trade unions. “Government has enabled consultations with employee representatives in the Labour Consultative Forum. This process must be embraced by the BRPs and taken to a state of completion. As a shareholder, Government wishes to engage constructively towards the national interest objective of creating a viable, competitive, sustainable airline in a constrained fiscal environment, taking into account the impact of COVID-19 pandemic on this situation.”
The business rescue plan proposes that Government spend another R26bn in rescuing SAA, which would allow the airline to reboot operations over the next eight months from June 2020 to January 2021, starting with domestic services in Levels 3 and 2, followed by regional and then international services in Level 1. It proposes that SAA operates limited domestic and international routes and concentrate on regional operations into Africa. It also proposes that SAA’s fleet be cut from 46 to 26 aircraft and start using small narrow bodies, which the airline does not fly at present. For the plan to be implemented, National Treasury and DPE are to provide written assurances of the required funding by July 15.
Public Enterprises Minster Pravin Gordhan previously made no secret of his unhappiness with the BRPs. The statement alludes to that, pointing out that “the BRPs had a substantial period of time and additional financial resources – R5,5bn to augment the revenue of SAA – at their disposal to undertake the tasks expected of a BRP, which, in terms of the Companies Act, is to develop a detailed business rescue plan, to consult with creditors, other affected stakeholders like employees, the shareholder and the Board and management of the company under business rescue”. “As the shareholder of SAA, Government, taking into account the broader national interests, has made it clear that the desired outcome should be to establish a viable, sustainable national carrier that must emerge from the business rescue process. Particularly so as government is expected to marshal the resources necessary for this process from diverse sources. Through government guarantees, the BRPs have had significant additional financial resources at their disposal to enable them to restructure SAA by stemming the tide of wastage, an excessive cost-structure and cash burn. We will assess the plan which, we are concerned, might not have been adequately accomplished.”
The DPE statement says: “Government remains committed to support a competitive, viable and sustainable national airline. This is to resolve the untenable situation of the current South African Airways specifically for its employees and its creditors, as well as to support important economic objectives. The aviation industry in South Africa requires the capabilities of an SAA that is reconstituted, restructured and reinvigorated, without the legacy burdens, including corruption, poor leadership and unsustainable costs, which have beset SAA’s past.”
