Pretoria’s government refuses to pump additional money into financially heavily shaken national carrier South African Airways. However, without a massive new cash injection, the 86-year-old airline will be unable to continue operating. Now COVID-19 appears to be the final nail in SAA’s coffin.
The public funds needed to stave off the Covid-19 pandemic leave little cash for supporting other ailing industrial sectors, including ill-managed airlines, Public Enterprises Minister, Pravin Gordhan stated in a reaction to the carrier’s financial woes. Harsh words that shocked both management and employees who had desperately hoped that the Pretoria politicians would find a way to rescue the airline at the last minute. Obviously, these expectations have now dissolved into thin air.
Airline without staff
Star Alliance member SAA has long been a case requiring root-and-branch restructuring. However, all attempts to reduce costs and bring the carrier back on its feet failed. The airline last made a profit in 2011. Over the past three years it has received US$1.08 billion (ZAR 20 billion) in bailouts and relied on state-guaranteed debt agreements to keep afloat but was nevertheless forced to apply for bankruptcy protection last December to avoid being grounded.
Due to the lack of funds in its coffers and the denial of further state aid, the management came up with plans to lay off the entire workforce beginning end of April. Since administrators lowered their thumbs on a successful resurrection of the airline, this will now affect 4,700 staff that have been offered severance deals as of 1 May. The proposed compensation will be one-week pay for each year of service but depends on the successful sale of assets such as real estate, slots at London Heathrow Airport, and several facilities, a document reveals. However, it remains to be seen whether the revenues generated by this will suffice to cover the targeted compensation measures, since the claims of the creditors must be satisfied first and foremost.
Zuma = corruption and mismanagement
In a joint statement, the South African Cabin Crew Association and the National Union of Metalworkers opposed the compensations offered, demanding a business-rescue plan instead. In their note, they claim that SAA can be saved although not in its current form.
During the past decade, the airline had become a revolving door for leading managers with almost a dozen CEOs being hired and fired, torpedoing any long-term restructuring strategies.
Particularly during the 9-year Zuma reign that ended in 2018, the airline was hit by several corruption scandals from which, combined with mismanagement, it has not recovered.
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