The business rescue practitioners (BRP) for South African Airways have issued a notice advising the airline’s employees of the intention to begin consultations for retrenchment, in terms of section 189 of the Labour Relations Act.

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, the administrators said.

Mango, SAA Technical and Airchefs are not included in this.

The move comes as part of the plan to restructure SAA’s operations, which the BRPs said would necessitate job cuts.

“Significant changes to conditions of employment, including remuneration and benefits, appear unavoidable and will be sought by agreement,” the administrators said.

“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.

“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,” they said.

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,” the administrators noted.

Massive losses

SAA has experienced numerous financial and business challenges, and accumulated losses of some R26 billion 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 BRPs said.

“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 R1.3 billion in revenue with the cost base that remains more or less flat,” they said.

“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,” it said.

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, the administrators said.

Consultation process

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 engaged 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,” the administrators said.

The company has 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.

“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,” the administrators said.

Read: SAA launches major sale on airline tickets