SAA set to proceed with layoffs as liquidation looms

Business Rescue Practitioners (BRP) Les Matuson and Siviwe Dongwana are set to proceed with plans to lay-off South African Airways' entire workforce following the government's announcement last week that it would no longer provide funding to the bankrupt carrier.

In their proposal to SAA's labour unions, the BRPs said that under the current circumstances, the airline is unlikely to now be rescued. As such, it will offer all 4,700 staff severance packages wherein employees will be given one week's pay for each year of service. However, the overall pay-out will depend on the successful disposal of assets such as real estate among others.
The Department of Public Enterprises, which is tasked with overseeing the carrier on behalf of the government, has since said in a statement that no agreements have been concluded and that talks between the BRPs and unions will continue on Monday, April 20.
Last week, Pravin Gordhan, who heads the DPE, told the BRPs that government would no longer underpin SAA's debts stating unequivocally that it would no longer support the following financing requirements:
an extension of the foreign currency borrowing limit to permit foreign financing of the business rescue plan;
a care and maintenance budget as proposed by the business rescue practitioners;
provide additional funding to sustain the business rescue process;
provide lending guarantees in respect of the business rescue process.It advised the BRPs to therefore "consider their options within their available resources".
SAA has been grounded since late March when the government declared a nationwide lockdown to stem the spread of the COVID-19 coronavirus. Aside from the pandemic's impact, SAA has suffered from years of poor leadership, corruption, and rising domestic and international competition, all of which have contributed to its decline.
Fellow bankrupt state-owned enterprise South African Express (XZ, Johannesburg O.R. Tambo) is itself teetering on the brink of liquidation after the government withheld ZAR200 million rand (USD12.77 million) worth of post-commencement funding (PCF) because its BRPs had failed to draw up an acceptable rescue plan.
With a hearing on the BRPs' application for liquidation now imminent, Fly Modern Ark (Johannesburg O.R. Tambo) has tendered a bid for the carrier. According to The Sunday Times, the proposal totals ZAR400 million rand (USD21.35 million) of which ZAR300 million (USD16 million) would be used to restart the carrier. In contrast, the remainder would be used to pay off creditors. The start-up, which reportedly has the backing of unnamed local and overseas funders, would avail a fleet of "well-maintained aircraft" to fly SA Express's routes.
Both SAA's and SA Express's nearly decade-long history of losses have contributed to the current strain on the South African fiscus. The International Monetary Fund (IMF) said in its report last week that in light of the current COVID-19 shutdown, South Africa's GDP is projected to contract 5.8% in 2020 from growth of 0.2% in 2019. Africa's most advanced economy, South Africa had already entered into recession in the final quarter of 2019 amid worsening power outages at state-owned power utility Eskom and demand for funding from struggling state-owned firms.

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