State-owned airline SAA announced on Monday that it would cut 944 jobs or about 20% of its workforce to bring costs under control.
The announcement came as the three largest unions representing airline employees have secured strike certificates and are ballotting members to protest over wages. SAA managers, who are in their own bargaining unit, have also obtained clearance for industrial action.
The unprofitable airline continues to burn R500m a month despite the efforts of its new management and directors to turn it around. The government hopes to fix the airline to attract a strategic equity partner, but wants to get it on a secure financial footing first.
Acting CEO Zuks Ramasia said in a statement that despite recent substantial capital injections from the government, the airline’s balance sheet remains weak. "Our continued losses and reliance on government guarantees to borrow money from lenders, have increased the interest costs, which impacts the operating cost of the business.
"We urgently need to address our ongoing loss-making position," she said.
Chief financial officer Deon Fredericks said in an interview on Monday that the company has to fix its costs in order to access further funding needed for working capital. The Treasury has provided a large bailout — R5.5bn from the government’s contingency reserve as well as an undertaking to repay R9.2bn of debt — but it will not be enough to fund operations.
First SOE retrenchments
The restructuring of SAA has always been a pillar of the turn-around strategy, which includes cutting routes; swapping to more cost-effective aircraft; and enhancing revenue, said Fredericks. SAA is the first state-owned enterprise to announce retrenchments, although many, particularly Eskom, are overstaffed. The company is also trying to freeze wages for the majority of employees and has offered no wage increases in negotiations with the main bargaining unit.
On Monday, before the notice was issued, Business Day
spoke to trade unions NTM, the National Union of Metalworkers of SA (Numsa) and the SA Cabin Crew Association (Sacca).
Sacca members have already voted overwhelmingly to strike, said the union’s treasurer-general Gift Bilankulu.
Should the strike go ahead, SAA will be grounded as managers, customer service agents and cabin crew down tools.
Fredericks said that the company is still engaging with unions as "the last thing we need is a strike", which will severely affect SAA’s revenue and the country. He said that in its last offer, the company offered to raise wages 5.9% but deferred the increase until the company had sufficient funding. This was rejected. NTM wants a 5.9% increase, while Numsa and Sacca are asking for an 8% hike.
Adding fuel to the fire is
the fact that SAA pilots were awarded a 5.9% increase in an arbitration award. Pilots are not part of the bargaining unit. Their conditions of service are part of a 10-year agreement within which the wage component is determined through a benchmarking exercise conducted by independent consultants.
SAA management had tried to bargain the pilots down or defer the increase, but the SAA Pilots Association invoked arbitration. SAA lost the arbitration and the award is binding.
Grant Back, chair of the SAA Pilots’ Association said: "We are talking about an inflationary-based increase. This is part of a 10-year contract. This deal was given as part of a concession by the pilots at that time. The company wanted labour stability and the ability to budget for increases in advance."
But workers in other jobs in the airline are furious about the discrepancy, which they say
is discriminatory. NTM president Mashudu Rapepa said: "The pilots got 5.9% but SAA has refused to give other employees the same. We are saying that whatever you give to other employees, give it to us."
Bilankulu said that though the union has a strike certificate, it is still open to engaging with management. But SAA has still not shifted from its 0% offer.
"The pilots have been given their 5.9% and have even been paid; 5.9% of a pilot’s salary is a lot of money. They say they cannot afford to pay us, but where are they getting the money to pay the pilots?" Bilankulu asked.
Numsa spokesperson Phakamile Hlubi-Majola said Numsa has not decided yet when it will make use of the strike certificate. She had harsh words, though, for finance minister Tito Mboweni, who has said he wants to persuade workers in the public sector and state-owned enterprises to be patriotic and make sacrifices.
"He is part of the same ANC which is responsible for the destruction of the airline.
"Through mismanagement and corruption, they have destroyed the airline, and then they have the audacity to speak about sacrifice," she said.
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