South Africa Airways Administrators Told by Court to Halt Severance-Pay Plan

(Bloomberg) -- South Africa’s labor court told the administrators of the state airline that they can’t force workers to accept severance payments, deepening the chaos surrounding the bankrupt company’s future.

The administrators, known locally as business rescue practitioners, were sued by the main labor unions at South African Airways. The BRPs have said there is no money to pay wages and the alternative to a process in which assets are sold to fund severance payments is liquidation, which could result in workers getting no payments. Public Enterprises Minister Pravin Gordhan has criticized the administrators’ performance and said he wants to create a new airline, without saying how. His approach has been endorsed by the National Executive Committee of the ruling African National Congress.

The tussle over SAA, which hasn’t made a profit since 2011 and has been surviving on government bailouts, is seen by investors as a litmus test of the state’s resolve to deal with indebted state companies that are draining its resources. The government has told the administrators there is no more state money available to help the airline, which until recent route cuts flew to six continents and operated a domestic service.

The coronavirus pandemic has seen its flights grounded and revenue largely choked off.

The court said the approach adopted by the administrators was procedurally unfair, according to a copy of the ruling seen by Bloomberg. The administrators said they are considering the judgment.

©2020 Bloomberg L.P.

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