State-owned SAA, which is already dependent on state handouts, said it would not withstand a strike that could cost it R50m a day, adding to its financial crisis, and would set off a chain of events from which it might never recover.
Two trade unions on Wednesday gave notice of the intention to commence "the mother of all strikes" on Friday after attempts to reach a wage settlement over several months failed. A walkout would ground the airline because the vast majority of employees — cabin crew, sales staff, customer service assistants and management — are unionised.
SAA is technically insolvent, does not have sufficient working capital to fund operations and is unable to raise funding from commercial banks without a guarantee from the Treasury, which has not yet been forthcoming.
On Monday the airline announced it would also begin a process that could see almost a fifth of its staff retrenched.
Acting CEO Zuks Ramasia said on Wednesday that the company has "made repeated overtures to the unions to acknowledge the severity of the situation in which we find ourselves and to work hand in hand with us to try and avert a worsening situation. The strike is going to exacerbate rather than ameliorate our problem, and will result in a set of circumstances from which there may well be no recovery."
In a hearing at parliament’s standing committee on public accounts on Wednesday, nonexecutive director Martin Kingston told MPs that SAA would not withstand a strike.
"The strike would cost the airline R50m a day and that is before you consider the impact on confidence levels of customers, who will want to take their business elsewhere, and on suppliers, who want to be paid in advance, and from regulators, both SA and international, some of which will not allow us to fly into their airspace if there is a question over our viability," he said.
SAA was "at the precipice" with the threat of impending strikes, which would fundamentally undermine the attempt to turn things around.
The two trade unions that say they will strike — the National Union of Metalworkers of SA and the SA Cabin Crew Association — have asked for a 8% wage increase. A third union, the NTM, which was balloting members on Wednesday, has asked for a 5.9% increase.
Insourcing
The unions have also tabled a raft of other demands, including insourcing of all contractors.
Ramasia said that after negotiations it had offered unions 5.9% but it could not guarantee that workers would in fact receive it. She said the increase was "subject to the availability of funds from lenders".
However, SAA’s attempts to raise money from lenders without a guarantee had failed, CFO Deon Fredericks told MPs at
the hearing.
"We have had a discussion with lenders about whether they would consider lending without a guarantee and they will not," Fredericks said.
SAA has received substantial support from the government over 2019, receiving R5.5bn to repay debt as well as an undertaking from Treasury to repay R9.2bn outstanding debt on its behalf over the next three years.
However, the airline — which loses about R500m a month — still requires working capital to continue functioning.
Previously SAA had estimated the amount required to be R2bn, but due to poor trading conditions this would now be more.
"We acknowledge the very significant support from the shareholder but I regret to say it is not adequate to address our current liquidity issues.
"The balance of R2bn was predicated on better performance and so that is no longer sufficient," said Kingston.
Should SAA be forced into liquidation, 10,000 jobs in SAA and its subsidiaries would be lost, the company said.
In addition, between 40,000 and 50,000 indirect jobs in related industries would also be cut, it said.
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