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Despite financial woes, SAA manages to pay November salaries

Nov 30 2019 12:29
Lameez Omarjee

In the midst of facing a "sudden deterioration" of its finances following strike action at the airline, South African Airways said it has paid its employees their November salaries.

The national carrier last week warned that November salaries might not be paid on schedule, Fin24 previously reported. Spokesperson Tlali Tlali had told Fin24 via Whatsapp that the airline was working to secure R2bn working capital to fund its daily operations, which includes employee salaries.

Earlier this week Business Day reported that SAA would pay half of workers' salaries. 

On Saturday morning, in an emailed response to Fin24, Tlali confirmed the full salaries were paid. "We confirm that all employees have received the balance of their November salaries," he said.

The airline's finances suffered a knock after employees belonging to the National Union of Metal Workers of South Africa and the South African Cabin Crew Association had embarked on an eight-day strike, against retrenchments and for salary increases. According to SAA, the strike cost it about R50m per day.

At the time Public Enterprises Minister Pravin Gordhan told members of Parliament that while workers were striking for pay increases, there was a possibility that the airline would not be able to pay salaries for the month.

With the help of the Council for Conciliation, Mediation and Arbitration, the unions and SAA eventually reached a deal on Friday November 22, 2019.

Just days after, the Department of Public Enterprises issued a statement saying that the strike and the consequential cancellation of flight bookings at the airline led to a deterioration of its finances. Government said the airline could not continue "as is" and would be working with SAA to form immediate actions to provide it support.

This week travel insurance divisions of both Santam and Hollard have since withdrawn insolvency benefit cover on SAA tickets.

The travel supplier insolvency benefit covers the failure of an airline when it declares bankruptcy, according to Santam.

In a statement issued by Santam, its Travel Insurance Consultants (TIC) had withdrawn the benefit after its international re-insurer had done so, based on the "worsening risk outlook and potential bankruptcy" of SAA.

"The risk associated with SAA's going-concern status has been an issue for many years. However, in light of recent events, the risk is now considered to be too significant by re-insurers to continue cover for new ticket sales," Santam said.

"The decision to withdraw cover was not taken lightly. The management of TIC has been in constant communication with the leadership of SAA concerning the challenges facing the airline to try and find a solution that avoids TIC withdrawing cover," the statement read.

Clients can still purchase a TIC policy and will be covered for all benefits offered, excepted for the travel supplier insolvency benefit.

TIC and its reinsurer may review their decision once SAA gets support and returns to profitability, Santam said.

The withdrawal of the benefit cover by TIC prompted travel group Flight Centre to stop selling SAA tickets. In a letter to its clients issued on Thursday, Flight Centre said ongoing concerns on SAA's financial stability and the unwillingness of their travel insurance providers to provide travel supplier insolvency benefit cover, Fin24 previously reported.

Similarly insurance group Hollard also withdrew the insolvency benefit cover, spokesperson Warwick Bloom confirmed to Fin24 on Saturday. Bloom emphasised that only the insolvency benefit cover is withdrawn and other benefits of the travel insurance policy still apply.

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