SAA’s administrators between a rock and a hard place

The administrators of South African Airways (SA, Johannesburg O.R. Tambo) have confirmed they have received ZAR1.5 billion (USD97.9 million) in state funding to execute the airline’s business rescue plan, but cannot disburse the funds because conditions stipulated by the government contravene South Africa’s Labour Relations and Companies Act. This comes as disgruntled SAA employees picketed outside the airline’s Kempton Park head office on December 3 demanding to be paid. The members of the National Union of Metalworkers of South Africa (NUMSA) and the South Africa Cabin Crew Association (SACCA) said they had not been paid for eight months. “Monies were allocated to the airline last month to fund the business rescue plan and the restructuring of the airline by Treasury, but workers have still not been paid, and yet the business rescue practitioners (BRPs) earn millions in fees and they continue to be paid. It is December and holidays are around the corner, but workers have no idea where their next meal will come from,” NUMSA charged in a statement. “ZAR1.5 billion was received from the Department of Public Enterprises (DPE) on Monday afternoon. However, the conditions that were stipulated for how it should be spent are in contravention of both the Labour Relations Act and Chapter 6 of the Companies Act. So, we are unable to utilise the funds until the conditions have been amended by the DPE,” ch-aviation was told by Louise Brugman, spokesperson for SAA’s administrators Les Matuson and Siviwe Dongwana. The money is part of a ZAR10.5 billion (USD684.8 million) state bail-out for SAA – funds that were diverted from other departmental budgets with the specifically stated aim of implementing the business rescue plan and restructuring the carrier. A sum of ZAR800 million (USD38.9 million) was allocated in the plan to employees and general (unsecured post-commencement) creditors. The administrator’s dilemma appears related to DPE’s recent unilateral decision to deviate from the approved business rescue plan by allocating ZAR2.7 billion (USD176.1 million) for the recapitalisation of SAA’s subsidiaries Mango Airlines (JE, Johannesburg O.R. Tambo), SAA Technical, and Air Chefs – none of which are in business rescue and for which no cash-flow allowance was made in SAA’s restructuring plan.