The government has contradicted the business rescue practitioners of the troubled SAA over their plan to rescue the airline. Photo: Rogan Ward/Reuters/African News Agency (ANA)
The government has contradicted the business rescue practitioners of the troubled SAA over their plan to rescue the airline. Photo: Rogan Ward/Reuters/African News Agency (ANA)

Government contradicts BRPs on SAA rescue plan

By Siphelele Dludla Time of article published Feb 7, 2020

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JOHANNESBURG – The government has contradicted the business rescue practitioners of the troubled South African Airways (SAA) over their plan to rescue the airline.

This as the government has ordered that the cancellation of 11 international routes, including a number of domestic routes, be reviewed.

SAA’s joint business rescue practitioners (BRPs), Les Matuson and Siviwe Dongwana, on Thursday, announced that domestic destinations – including Durban, East London and Port Elizabeth – would cease to be operated by SAA at the end of the month.

They said SAA would fly only between Johannesburg and Cape Town, on a reduced basis, in a bid to curtail operational costs.

The comprehensive restructuring programme, which would culminate in a business rescue plan to be published later this month, is part of improving the airline’s liquidity, including the sale of selected assets and retrenchment of workers.

The rescue plan will be presented to SAA’s creditors for approval. However, the Department of Public Enterprises said it was concerned that the decisions might have caused market and customer uncertainty that could jeopardise the long-term future of the airline.

The BRPs are empowered by the Companies Act to make rational decisions necessary to turn a distressed airline around or propose for its liquidation if it cannot be saved.

In a statement late Friday, the Department said the government will be making representations to Matuson and Dongwana.

It said this would balance the necessity for trimming unprofitable routes with the need to ensure the future sustainability of both the airline and South Africa’s aviation industry.

“This will necessitate a review of the BRP’s recent announcement,” it said.

“Our submission will include a proposal that the route network changes announced by the BRP be reviewed to ensure the sustainability of the airline.”

The Department’s statement followed President Cyril Ramaphosa’s remarks that the government did not agree with the rescue plan that proposed the cessation of domestic flights.

"We are not in agreement with what the rescue practitioners have come up with, that domestic flights should be cancelled. We want to find out what the rationale is," Ramaphosa told journalists in Pretoria before departing for Ethiopia.

“We want to have a discussion with them, because SAA is not only a great symbol for the country, but it is also an economic enabler."

SAA received R3.5 billion in emergency funding from the Development Bank of Southern Africa last week to fund its operations.

Last month, the airline scrapped close to 100 domestic and international flights to reduce costs.

In December, the airline was placed in business rescue following a shortage of funding for its operational expenses.

Meanwhile, workers’ unions have vowed to go to court to challenge the proposed job cuts and reduction of domestic flights by the rescuers.

The National Union of Metalworkers of SA (Numsa) and the SA Cabin Crew Association (Sacca) said they reject this proposal as it was announced while the meeting discussing its details was in progress.

“No consultation whatsoever has taken place with labour as required by law and the BRP has acted in flagrant disregard of the provisions of the Labour Relations Act,” they said.

“Therefore, we have instructed our attorneys to explore all legal avenues available to us. We will communicate in due course as to our next course of action.”

The department of public enterprises said government and BRPs were both committed to a viable SAA as an outcome of this process.

BUSINESS REPORT

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