This archive report was first published on 6 July 2020.
South Africa's national carrier, South African Airways (SAA), is on the brink of bankruptcy, with over 50,000 employees at risk of losing their jobs if creditors and workers' unions vote to liquidate the airline.
On July 14, a creditors meeting will be held to decide whether to maintain the business rescue plan for SAA or wind it up. The airline was placed under business rescue in December 2019 to save it from collapse.
Despite repeated government bailout efforts over the past seven years, SAA remains cash-strapped and in need of a solution. The Treasury has stated that there will be no more bailouts for SAA, and the airline should be closed.
However, the Department of Public Enterprises (DPE) has cautioned against liquidation, warning that it could result in the protracted and costly liquidation of the airline, as well as the undervaluing and disposing of its assets.
According to the DPE, liquidation would mean that creditors would receive a negligible dividend after all secured and preferred creditors have been paid. In contrast, the DPE believes that business rescue is a viable alternative that supports job preservation and the ability to bring the airline back from the brink.
As part of the business rescue plan, 2.2 billion rand ($129 million) has been set aside for voluntary severance packages. The DPE has urged SAA employees to take up these packages, which would provide a maximum of 32,000 rand ($1,885) per staff member, regardless of years of service.
Voluntary severance packages can be offered to employees soon after the business rescue plan is voted for, and would come with packages including one week calculated per year of completed service, one-month notice pay, accumulated leave paid out, a 13th cheque, and a top-up of severance packages.
