End of the road: South Africa'a airline readies severance pays

No more going anywhere... South African Airways will be handing out pink slips to all its staff after the government said it cannot keep picking up the tab any longer.

Johannesburg: South African Airways plans to lay off its entire workforce after failing to persuade the government to provide more financial aid, a move that threatens to ground the 86-year-old carrier for good.

The state-owned airline has offered severance deals to all 4,700 staff from the end of this month after administrators concluded that a successful turnaround is now unlikely. The basic value of compensation will be one-week pay for each year of service and will depend on the successful disposal of assets such as real estate, according to the document.

No agreements have been concluded, the Department of Public Enterprises said in a statement. “There are discussions with the unions on alternatives to the current South African Airways business model, success of the business rescue process, and the best possible outcome for the airline’s employees,” it said.

SAA has relied on bailouts and state-guaranteed debt agreements for years, having last made a profit in 2011, and was put into a form of bankruptcy protection in December. Public Enterprises Minister Pravin Gordhan said earlier this week that the cost of staving off the COVID-19 pandemic meant no more cash could be extended, while Finance Minister Tito Mboweni said the carrier’s closure could help shore up state finances.

Industry-wide chaos

The coronavirus may prove the final nail in the coffin for SAA, which was reducing routes and considering job cuts even before the outbreak forced airlines around the world to ground airplanes. The industry could lose $314 billion in ticket sales this year, according to the International Air Transport Association, as lockdowns and travel bans take an increasingly heavy toll on the global economy.

SAA has been flying cargo planes and chartered flights to countries such as Germany and Brazil in recent weeks, but no commercial passenger services. The plan to offer severance packages to all staff was first reported by the News24 website.

What to dispose first

The team of administrators will now look to sell assets and raise cash to repay creditors. Two prized nighttime operating slots at London’s Heathrow Airport could be up for grabs, people familiar with the situation said in February.

“Part of the business-rescue process is to consult with creditors, unions and the shareholder as the process unfolds,” the Department of Public Enterprises said.