Business rescue plans for SAA in jeopardy as unions cry foul

Talks about the airline’s future hit an impasse as unions cry foul over route cuts and demand the removal of business rescue practitioners

The business rescue process currently under way for SAA has been plunged into crisis, after pandemonium erupted during a meeting between the airline’s business rescue practitioners and labour representatives on Thursday.

At the meeting, unions learnt that the rescue practitioners had already announced in a press statement that various flights would be cancelled – even before the business rescue plan was released.

What this could mean for the future of personnel at the beleaguered airline remains unclear.

Irvin Jim, general secretary of the National Union of Metalworkers of SA (Numsa), is understood to have walked out of the meeting.

The breakdown is so significant that one of the unions is considering taking legal action to have the practitioners, Les Matuson and Siviwe Dongwana, removed.

Numsa general secretary Irvin Jim

On Tuesday, the Johannesburg High Court will hear an urgent application by SA Airlink against Matuson and Dongwana.

SA Airlink is requesting that an amount in excess of R700 million in ticket sales revenue, collected by SAA on behalf of SA Airlink, be immediately paid to SA Airlink.

However, according to Derek Mans, trade union Solidarity’s representative for the aviation industry, there is only enough money to keep SAA running until the end of the month.

If SA Airlink is successful in its application, the payment could drive the national carrier significantly closer to liquidation.

If it is unsuccessful, SA Airlink will be one of SAA’s biggest creditors.

This could see SA Airlink and Comair – to which SAA is indebted to the tune of about R1 billion – hold decisive voting rights as to whether the business rescue plan is accepted. The plan must be published by the end of February.

SAA’s biggest competitors may therefore have a decisive say in determining its fate.

Cloete Murray, chairperson of the workers’ committee, said there was a reasonable expectation that both competitors would vote against the plan, irrespective of its content.

Comair, in particular, has been fighting against what it regards as unfair competition by SAA and its low-cost affiliate, Mango, as taxpayers subsidise the group through bailouts.

If the plan fails, the national carrier may well find itself in liquidation.

But this situation may also be contested in court.

The breakdown between the practitioners and the workers’ committee started early in the week, when Matuson and Dongwana wanted support for an accelerated section 189 process, without providing any detail.

This would have meant that representatives of SAA personnel would have had to agree to lay off about 1 000 of their members, without knowing who would be affected and what the rationale for the move was.

Mans said it sounded as if the layoffs were a condition set by financiers wary of advancing more money to keep SAA in the air.

The workers’ committee refused and adjourned to discuss the matter.

On Wednesday afternoon, the committee was invited to attend an hour-long meeting with the practitioners, scheduled for 2pm the next day, without being told what the meeting was about.

Shortly after the start of Thursday’s meeting, the workers’ committee learnt that the practitioners had just released a press statement about the cancellation of almost all of SAA’s domestic routes, along with five regional routes and five international ones.

The cat was among the pigeons. Committee members received phone calls from SAA personnel across the world, wanting to know what would become of their jobs.

The committee reacted furiously to the release of the press statement, saying it had not been consulted about the move beforehand. Tensions ran high and the meeting adjourned only in the early evening, after labour had begun to ask serious questions about the independence of the practitioners.

Mans said the cancellation of the routes was not part of the business rescue plan; it was only aimed at protecting the money in SAA’s coffers. This means that SAA is an airline that can barely afford to fly.

Solidarity was consulting with its legal team on Friday, after Numsa asked for support to bring an urgent court application requesting the removal of Matuson and Dongwana.

National Union of Metal Workers is seeking assistance

According to Louis Klopper, a business rescue practitioner at Coronado Consulting, the voting rights in respect of the business rescue plan will be proportional to the extent of the debt owed to the creditors.

The weight of every creditor’s voting rights will also be set out in the plan itself.

Ten days after the plan is presented to creditors and stakeholders, they must vote on the plan at a creditors’ conference.

This meeting should therefore take place in early March.

The plan may be approved or rejected, or amendments may be suggested, with the practitioners being afforded the opportunity to adjust it and present it again.

Murray said that the independent creditors – those without ties to SAA – would be decisive.

Creditors can also build up a voting bloc by purchasing the voting rights of other shareholders. But if it emerges that creditors have used their votes for purposes other than those that are in the best interest of the company – for example, to wipe out competition – the business rescue practitioners can approach the court for a declaratory order nullifying the voting.

On Friday night, the government said it would ask the business rescue practitioners to review their announcement regarding the cancellation of unprofitable routes. This after President Cyril Ramaphosa expressed his displeasure with the cuts.

All domestic routes except Cape Town were cancelled, as well as some regional and international routes.

Public Enterprises Minister Pravin Gordhan says government will make representations to the practitioners.

He says they need to balance trimming unprofitable routes with the need to ensure the sustainability of the airline.

Read: Gordhan: Business rescue will restore confidence in SAA

Gordhan says the decisions have caused market and customer uncertainty that may jeopardise the long-term future of SAA.

. In a related development, transport and logistics company Ziegler SA this week succeeded in its application to place SA Express, another state-owned airline, in business rescue. SA Express allegedly owes Ziegler more than R11 million.

SA Express has, however, indicated that it will appeal the order.

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