The Department of Public Enterprises (DPE) says it’s working with other stakeholders to finalise the business rescue plan for South African Airways.
To complete the process, the DPE said it is overseeing four phases, including:
- The restructuring of the airline – including the implementation of Voluntary Severance Packages to employees;
- The appointment of non-executive directors and new management team;
- The selection and appointment of Transaction Advisors;
- The formation of a customer-centric airline designed to be lean, technology capable, digitally modernised and agile to service all market segments.
Restructuring and appointments
The voluntary retrenchments provided in the business rescue plan will see the retrenchment of all employees with only 1,000 employees remaining to start the new airline on different terms and conditions to those currently existing, the DPE said.
About 1,000 employees will be placed on a Social Plan – a temporary training lay-off scheme so that they can be absorbed into the new airline as and when new positions become available.
“As the shareholder on behalf of government, the DPE will soon appoint a smaller, effective, reinforced, and empowered board of directors who will then appoint the airline’s new executive management including, chief risk officer, chief information officer and chief operating officer,” it said.
The DPE said it has also identified a Transaction Advisor whose mandate is to assist the department in transaction planning, feasibility analysis, procurement and implementation of transactions and raising funds and investments for the new airline.
The advisors are also expected to assess unsolicited expressions of interests from private sector funders, private equity investors and partners for a future restructured SAA.
“The DPE welcomes the attraction of a mix of local and international investor groups to provide the new airline with technical, financial, and operational expertise to ensure significant South African ownership whilst diversifying the investor base.”
What the new SAA will look like
The DPE said that the new SAA will be run in a professional and sustainable manner to support key economic sectors, including tourism and solidify South Africa as an African gateway to international markets.
The DPE said that it would like to see the following characteristics at the new airline:
- An efficient and modern aircraft fleet with hybrid density options acquired at competitive rates resulting in cost efficiency;
- An offering with the right routes, at the right times and at competitive prices; network structure that allows for connectivity at hubs, whilst maintaining elevated aircraft utilisation;
- Connecting Africa to world economic hubs whilst maintaining diplomatic connectivity;
- A right-sized and motivated workforce and
- A customer-centric airline designed to be lean, technology savvy, digitally native and agile to service all market segments.
“The DPE believes that the restructuring contained in the Business Rescue Plan 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.”
Transformation and pilots
One issue which was not addressed by the DPE is the issue of transformation at the new airline.
In May, parliament’s portfolio committee for Transport raised concerns about the lack of transformation in South Africa’s aviation sector.
Responding to annual presentations by the Airports Company of South Africa (Acsa) and the South African Civil Aviation Authority (SACAA), members of the committee noted with concern that the majority of pilots and cabin crew are white.
Data provided by the Civil Aviation Authority shows that the vast majority of pilots in the country are white (89.2%). By comparison, just 7.1% of pilots are black South Africans, while coloured and Indian pilots make up a combined 3%.
To address this, media reports have indicated equal employment will be more important than seniority for determining which pilots will be retained at the new SAA.
According to the Rapport, this proposal was contained in a notification sent by SAA’s business rescue practitioners (BRPs) Les Matuson and Siviwe Dongwana to unions representing the airline’s employees.
As part of the restructuring, SAA’s current complement of 625 pilots will be slashed to 88. More than R1 billion of the R2.2 billion set aside for voluntary severance packages will go to these retrenched pilots.
Those who are retained will earn an annual salary of between R950,000 and R2.1 million, with a a 20% premium included for flying certain planes.
According to the DPE, senior pilots in the lower ranks currently earn R3.6 million without benefits and incentives.
In terms of the selection criteria, SAA wants to use a “first-in-first-out” approach, which benefits employees with longer years of service. This will be subject to the relevant skills, qualifications, and experience for the position.
However, the airline has included that an equal employment veto be used to ensure reasonable representation for black, female, and disabled employees, in order to address historical imbalances.
Trade union Solidarity’s representative for the airline industry Derek Mans believes applying criteria other than seniority is discriminatory, and has said the union will challenge the proposal.
The exact retrenchment criteria will be determined during consultations led by the Commission for Conciliation, Mediation, and Arbitration (CCMA), which are set to start on 11 August, Mans indicated.