South African Airways Labor Unions Accept Severance Packages

South African Airways cleared another hurdle needed to ensure the state-owned carrier’s survival when most labor groups agreed to sweetened severance packages for retrenched workers.

The National Union of Metalworkers of South Africa and the South African Airways Cabin Crew Association, which were fiercely opposed to plans to cut the workforce to 1,000 staff from about 4,700, agreed to fresh terms including unpaid training courses for some of the staff beyond their departure, the government said in a statement late Tuesday.

The cost to the state of reducing SAA’s workforce will remain at just over 2.2 billion rand ($129 million), but the carrier itself will need to find as much as 56 million rand more to cover annual pension and medical-aid costs for 1,000 workers put on the re-skilling program, according to a revised rescue plan published by the airline’s administrators Wednesday.

The agreement represents an important breakthrough before a July 14 meeting, when SAA creditors, unions and other groups will vote on a revival plan designed to ensure the loss-making carrier’s survival. The alternative is for SAA to be put into liquidation, shuttering an 86-year-old airline that many in government see as vital to international trade and tourism despite its need for repeated bailouts.

SAA’s main champion in government is Public Enterprises Minister Pravin Gordhan, but he faces opposition from Finance Minister Tito Mboweni, who would need to approve the extra funding needed for the carrier’s latest relaunch. The administrators’ plan requires at least 26.7 billion rand in state finances, about 10 billion rand more than previously allocated, and the National Treasury said last week that SAA should instead to be shut down.

SAA was placed in a local form of bankruptcy protection in December, but initial recovery plans were thrown into disarray when the coronavirus pandemic forced the grounding of all commercial passenger flights from late March. The government and administrators have frequently clashed over restructuring proposals since then, with the state insisting there are private investors willing to come in and help revive the carrier.

The South African Airways Pilots Association hasn’t agreed to the new job-cut plans, and will pursue a parallel process to consult the airline’s administrators. Six other unions endorsed the offer following talks on Tuesday.

©2020 Bloomberg L.P.

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