South African Airways has set itself up for a confrontation with labor unions after the cash-strapped carrier initiated talks that could see its workforce reduced by almost a fifth.
The reorganization of all the airline’s units, excluding low-cost carrier Mango, Air Chefs and the SAA Technical unit, could result in 944 of its 5,149 employees being fired, SAA said in an emailed statement late Monday. The Congress of South African Trade Unions, the country’s biggest labor group, denounced the decision and accused the airline of failing to consult adequately.
“It’s a reckless announcement. You cannot just throw people on the unemployment line,” Sizwe Pamla, the federation’s spokesman, said by phone on Tuesday. “There is no talk to unions. They already know the specific number of people who are going to be retrenched. There are options that have to be explored.”
SAA, power utility Eskom Holdings SOC Ltd., the South African Broadcasting Corp. and state arms manufacturer Denel SOC Ltd. are among state-owned companies whose finances are in dire straits after years of mismanagement and alleged corruption. Finance Minister Tito Mboweni last month said the government is talking to potential investors about taking a stake in the airline to ease the burden on the national budget.
Potential Partners
Identifying an equity partner has been proposed before, though no buyer has officially come forward. Ethiopian Airlines Group Chief Executive Officer Tewolde Gebre Mariam last month said his airline would consider investing if a request was made. Richard Branson, the founder of Virgin Atlantic Airways Ltd., has said his company would also consider taking a stake.
SAA has incurred more than 28 billion rand ($1.9 billion) of cumulative losses over the past 13 years and missed the deadline to submit its earnings for the financial year through March. While it recently received a 5.5 billion-rand government lifeline to extend maturities on outstanding debt, it hasn’t been able to reach an affordable repayment plan with creditors.
“We urgently need to address the ongoing loss-making position that has subsisted over the past years,” acting Chief Executive Officer Zuks Ramasia said in Monday’s statement. “That is why we are undergoing a restructuring process that seeks to ensure effective implementation of the accelerated long-term turnaround strategy amid the present prevailing operational challenges.”
The announcement of the plan to cut staff comes as SAA struggles to reach a wage agreement with unions and their members have threatened to strike unless their demands are met.
Strike Threat
Deon Fredericks, SAA’s interim chief financial officer, said the airline was committed to consult fully with the unions about retrenchments and it was required by law to first notify them of its intention to embark on the process before initiating talks.
“We note with concern any threat by the unions to consider initiating industrial action,” he told reporters in Johannesburg. “Any interruption to our operations endangers the future of our airline, our ability to deliver our strategy and threatens not just one job but every job in SAA, as well as related industries.”
The restructuring is expected to save SAA about 700 million rand a year and it aims to complete the process by the end of March next year, according to Martin Kemp, the airline’s acting head of human resources. The airline had given “an indicative number” of job cuts and they may change once consultations are complete, he said.
In his medium-term budget policy statement last month, Mboweni said the government will repay SAA’s outstanding government-guaranteed debt of 9.2 billion rand over the next three years.
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