How much SAA employees will be paid if the airline is shut down

The Department of Public Enterprises (DPE) has warned South African Airways (SAA) labour unions and creditors against voting for the liquidation of the company, stating that the impact of such a decision would be devastating.

“The DPE would like to caution SAA employees, labour unions, and creditors that liquidation – the process of winding down the airline and disposing of its assets, will lead to financial hardship for employees and substantial undervaluation of assets,” the department said in a statement.

“All SAA stakeholders who are in a position to either support or reject a business rescue plan for SAA should realise that business rescue provides a better outcome than liquidation and should be supported for their collective interests.”

According to the department, SAA’s business rescue practitioners (BRPs) have scheduled a creditors’ meeting for Tuesday 14 July to vote on the business rescue plan for the company.

A vote in favour of the plan by 75% of the voting interests would be required to carry the vote – otherwise the airline will be liquidated.

The government urged voters to support the business rescue plan, arguing that liquidation would be devastating for all parties involved.

“As the shareholder on behalf of the government, we are of the view that business rescue is a viable alternative to liquidation – one which supports job preservation and the ability to bring the airline back from the brink to a position where some employees, labour unions, and creditors can continue to contribute to the South African economy and its integration into the global economy,” the department said.

The DPE added that during a drawn-out liquidation process, creditors would likely receive a negligible dividend after all secured and preferred parties had been paid out.

Employees would get a maximum of R32,000

In the event of SAA’s liquidation, the department said that employees would receive a maximum of R32,000 each, regardless of their years of service at the company.

This payout would be distributed to the extent that there are funds available, which means that the amount may be significantly less than R32,000.

Employees would also only receive payment after the final liquidation and distribution account has been approved, which can take up to two years, the department said.

“Therefore it stands to reason that generally, business rescue dividends should result in a higher return for creditors than would result in a liquidation situation,” the department said.

“The DPE is convinced that the R2.2-billion budgeted for Voluntary Severance Packages (VSPs) for SAA employees is the best available option at a time when the government is faced with massive financial demands and fiscal constraints.”

If the business rescue plan is approved on 14 July, these VSPs can immediately be offered to employees.

These packages would provide employees with one week of pay per year of completed service, one-month notice pay, accumulated leave pay, a 13th cheque, and a top-up of severance packages.

“The transformation of SAA into a competitive airline will, unfortunately, require sacrifices and a major restructuring, starting on a conservative basis and gradually and systematically building up over the next three years to re-employ as many of the displaced employees who have the necessary skills and competence.”

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How much SAA employees will be paid if the airline is shut down