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Solidarity says SAA nearing 'total collapse', wants it placed in business rescue

Nov 21 2019 10:35
Jan Cronje and Carin Smith

Trade union Solidarity has served papers on cash-strapped airline SAA and the ministers of finance and public enterprises, asking a court to put the flag carrier in business rescue.

The union made the announcement at a media briefing on Thursday, saying it has requested an urgent court date to hear the case. It said it served government with a notice of the application on Wednesday and has not yet received a response. 

Solidarity's chief operating officer, Dirk Hermann, told journalists that the airline was "hopelessly insolvent" and nearing "total collapse". 

He said that business rescue would afford the airline a measure of stability, saying it was heading towards liquidation. He said that he hoped the state would not oppose the application. 

Solidarity's announcement comes as a strike for higher wages by the National Union of Metalworkers of South Africa and the South African Cabin Crew Association entered its seventh day. The two unions are currently meeting SAA management for mediation at dispute resolution body the CCMA.

This is not the first time that Solidarity has proposed business rescue for SAA. In April and May 2018, and again in July 2019, for instance, Fin24 reported that Solidarity indicated that it was mulling going to court.

Thursday was the first time that it had lodged a business rescue application, however, 

In the past the union said it even wrote to President Cyril Ramaphosa, then finance minister Nhlanhla Nene and Minister of Public Enterprises Pravin Gordhan to invite them to join the application.

In a April 2018 letter to Ramaphosa and the ministers, Solidarity argued that SAA has been subsidised by taxpayers for too long and that the airline did not have "reasonable prospects" of generating growth or profits based on its financial performance.

Also in July this year, DA member of Parliament Alf Lees said business rescue might be a means to stop SAA's losses. In his view, the airline should be sold to private investors as he regards government's bailouts of SAA as a pointless exercise.

UPDATE: SAA announced on Thursday late-morning that it is suspending all services between Johannesburg and Hong Kong as from Saturday November 23 until December 14, 2019.

According to SAA, this decision has been taken "to curb significant financial losses incurred on the route, exacerbated recently by the ongoing political tensions in Hong Kong". SAA will instead concentrate on resuming more regional services at the earliest opportunity and make better use of all its resources, according to Philip Saunders, SAA's chief commercial officer.  

South African Airways is scrambling to obtain R2bn before November 20, a source told Fin24 two weeks ago.

SAA spokesperson Tlali Tlali told Fin24 on Thursday afternoon that the airline is still in negotiations regarding this matter of the funding needed. He said the decision to cancel flights to Hong Kong was because it is a loss-making route on the one hand, and due to the impact of the continued unrest in Hong Kong compounding the situation on the other hand.

"It is important to emphasise that ad hoc cancellations for operational reasons are commonplace in the airline business. Therefore, there is no nexus whatsoever between the operational decision taken on Hong Kong and the industrial action currently underway at SAA," said Tlali.
 

solidarity  |  saa
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