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Scrap 'untenable' SAA route cancellations, protect workers, but turn SAA around - SACP

Feb 08 2020 12:38
Carin Smith

The South African Communist Party (SACP) wants the most recent plans announced by the joint business rescue practitioners (BRPs) of embattled state-owned airline South African Airways (SAA) to be "rescinded as a matter of urgency".

In a statement the SACP calls for workers' rights to be fully protected while at the same time pursuing the turnaround of SAA. It describes alleged job cuts that could take place at SAA as part of an attempt by the BRPs to make the airline sustainable as "untenable" and called for "alternatives" to be found after "meaningful" consultation with unions.

SAA's joint BRPs Les Matuson and Siviwe Dongwana announced earlier this week that, as from the end of February, the airline will be cancelling some routes and reducing some frequencies, both domestically and internationally. For example, all of its domestic routes, apart from Johannesburg to Cape Town, will be cancelled, it was announced. Domestic routes operated by Mango will, however, not be affected by the changes.

The BRPs emphasised that this is aimed at "supporting SAA's transformation into a sustainable and profitable business and in line with the urgent action required to conserve cash". A reliable source told Fin24 that none of these cancelled routes are actually profitable.

At the same time, an aviation expert told Fin24 that the plan to cancel a number of routes and reduce some frequencies could leave a gap in supply, which in turn could lead to increased airfares for consumers as it is not a given that it will be filled by other airlines.

"SAA is a network carrier, not a point-to-point carrier. It is inconceivable that SAA will thrive in serving the remaining international destinations without serving its own domestic market except for only one route, the Johannesburg and Cape Town route," commented the SACP.

It accuses the BRPs announcement of the intended route cancellations "giving way to private profit interests" and making it "extremely difficult for SAA to re-establish itself as part of its desired turnaround on these domestic routes".

The SACP suggests that the BRPS should rather try to increase the load factors on SAA flights – especially the domestic routes - essentially "filling the seats" by, in its view, reducing flights on those routes, but not cancelling them altogether.

The SACP is not satisfied with the rights that the business rescue process provides the BRPs in their mandate to try and make cash-strapped SAA sustainable and would rather see government intervene in the process "in the national interest".

Even President Cyril Ramaphosa on Friday indicated his unhappiness with the BRPs plans for route cuts and reduced frequencies, saying government does not agree with this plan and will discuss the matter with the BRPs. Subsequent to Ramaphosa indicating his unhappiness, the Ministry of Public Enterprises issued a statement, saying government is concerned that "recent decisions concerning SAA have caused market and customer uncertainty that may jeopardise the long-term future of the airline", indicating that a review of the BRPs' recent announcement is necessary.

Ahead of SAA going into business rescue in December last year, Fin24 reported about concerns in the aviation industry that government might try to interfere with the BRPs in the execution of their duties to try and see if SAA indeed can become sustainable.

An international aviation expert, who preferred to remain anonymous, told Fin24 on Saturday that government interference "shows that they do not understand the problem at hand".

"The BRPs are really trying to save SAA, but they must keep a free hand otherwise SAA is not rescueable. Airlink (can) jump in on cancelled domestic routes and Mango, Safair and Kulula are well positioned to serve short haul routes," he said. "So, the cancellations do not hurt the public in the medium term."

The National Union of Metalworkers of South Africa (Numsa) has warned earlier that SAA intends to accelerate plans to reduce its wage bill. Just recently the state-owned Development Bank of Southern Africa had to come to the rescue of SAA with a R3.5 billion funding lifeline to avert the airline's total collapse.

The intended cancellation of certain domestic routes by SAA will, according to Numsa and the SA Cabin Crew Association have a devastating impact on workers and their families because it "effectively means that SAA in Port Elizabeth, Durban and East London will be closed down and workers will be retrenched"

The National Transport Movement (NTM) said earlier that, after it met with the BRPs, it is ready to deal the question of restructuring in terms of the Labour Relations Act, aiming to, where applicable have the redeployment of employees to subsidiaries of SAA, government departments, other SAA divisions, go on early retirement, being re-skilled or obtaining temporary employment.

Tabassum Qadir, CEO of Uprise.Africa and former co-chair of the grounded Skywise Airline, says there is no magic wand in the business rescue process. In her view, the SAA BRPs' decision to cancel certain routes to manage the airline's finances until it receives a new capital injection may be a good financial decision for the short term.

At the same time, she feels a state-owned airline should be obliged to service routes to stimulate local commercial activity, using cost-recovery pricing. Likewise, flying to global non-priority countries, could have some strategic significance for South Africa.

"It is also a harsh reality that the South African government can no longer afford to keep its national airline afloat. Neither should South African taxpayers be expected to," she comments. She, therefore, suggests that the concept of Equity Crowdfunding be looked into as an option to perhaps address SAA's financial woes.

Wikipedia defines equity crowdfunding as "a mechanism that enables broad groups of investors to fund startup companies and small businesses in return for equity. Investors give money to a business and receive ownership of a small piece of that business".

In October last year, before SAA went into business rescue in December, government announced that it would help SAA repay its R9.2bn in government-guaranteed debt over the next three years.

A formal business rescue plan is set to be submitted by the BRPs by the end of the month. At the time of publication, the BRPs did not have a response.

sacp  |  saa  |  numsa  |  business rescue  |  aviation  |  airlines
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