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Public Enterprises announces SAA severance packages, urges approval of rescue plan


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Public Enterprises announces SAA severance packages, urges approval of rescue plan

25th June 2020

By: Rebecca Campbell
Creamer Media Senior Deputy Editor


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The Department of Public Enterprises (DPE) announced on Thursday that, should the creditors of State-owned national flag carrier South African Airways (SAA), which is currently under business rescue, vote in favour of the business rescue plan for the airline, voluntary severance packages (VSPs) would immediately be made available to current SAA employees. Thursday is also the day of the creditors’ vote.

To pass, the business rescue plan needs 75% of SAA’s creditors to vote in its favour. Should the plan be rejected, the airline will be placed into liquidation, a process the DPE, in its statement, describes as “protracted and costly”. The department supports the approval of the business rescue plan, describing such approval as “the most expeditious option”, allowing SAA restructure itself, its debts, its other liabilities, leading to the appearance of a new airline, with integrated domestic, African and intercontinental services, and which was competitive and sustainable.


The DPE assures that the VSPs it is offering are in compliance with the guidelines of the Basic Conditions of Employment Act and the Labour Relations Act. They will be made up of one week’s salary per year of completed employment, one month’s notice pay, an extra month’s (bonus) cheque (13th cheque), a pay out of accumulated leave and a “top-up of severance packages”. Further, the salary calculations for the VSPs would be based on a backdated 5.9% pay rise, which had been agreed last November. And there would also be an incentive pay scale, based on the total cost of employment of the worker. This VSP programme is the DPE’s final offer and has been communicated to the airline’s employees and presented to the Leadership Consultative Forum, created by the department to help discuss and plan SAA’s future.

“The department has given a great deal of thought to the packages and wish [sic] to emphasise that a new, restructured, viable airline cannot be competitive if it would be required to bear the cost of carrying the current SAA employees,” it explains. “The national airline is not in a position to offer any additional benefits and it is important to recognise that the creditors would be keeping a watchful eye on how much money was being spent by SAA as opposed to what they were trying to recover in the business rescue process.”


The DPE warns that, if the unions reject the offered VSPs, the creditors would be unlikely to approve the SAA business rescue plan. If the plan is rejected, and the airline goes into liquidation, then its employees would receive a maximum of only R32 000 – assuming the funds were available. Moreover, such monies could only be distributed once the final liquidation and distribution account had been approved, which could take up to two years.

Employees who accept the VSPs are also being offered a skills development programme. This would equip the unemployed workers with new skills, aimed at providing them with the best opportunities for obtaining new aviation sector jobs, as the industry recovers from the effects of the Covid-19 pandemic, or jobs in other sectors of the economy.

“As the shareholder on behalf of government, the DPE believes the approval of the business rescue plan would help creditors and employees to be the co-creators of a new airline and ensure a strong base is maintained for the growth of the local aviation industry,” it affirms. “Employees who take up the VSPs will be entitled to re-apply for positions in the new restructured company as it grows.” 


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