A plan to discontinue South African Airways (SAA) took shape this weekend after the government confirmed that it was developing a business case to create a “new” national carrier.
This as the global aviation industry faces massive financial losses and an uncertain path to recovery.
In a statement over the weekend, the South African Department of Public Enterprises (DPE) said the government and unions were working together on a business model that dealt with what a future national carrier would be.
The DPE said the new airline would be funded through various options, including strategic equity partners, funders and the sale of non-core assets.
However, the state would continue to be the biggest shareholder, Independent Online reported.
The plan emerged after the government and union representatives last Friday concluded crunch talks to avert SAA’s collapse following SAA joint business rescuers Les Matuson and Siviwe Dongwana threatening to quit the process.
The rescuers had argued that SAA would have to be wound down after securing severance packages for the airline’s 4708-strong workforce as the government declined to grant them a R10bn ($539.4m) bailout.
The DPE said a leadership compact had been signed by all parties that committed to taking a new approach, and acknowledging that there would be a major performance-based culture change for all leadership, management and employees as the transition to a new airline took place.
“The transition to the new airline may require sacrifices, pain and hardships for all concerned, particularly for those employees who may be displaced.
“It will not be the old SAA, but the beginning of a new journey to a new restructured airline, which will be a proud flagship for South Africa,” the DPE said.
A portion of SAA could soon be on the market, as Finance Minister Tito Mboweni last week told Parliament that there would be a sale of poorly functioning state-owned enterprises (SOEs), although he did not mention any by name.
SAA is in dire financial straits as it has failed to raise the R500m ($27m) required to pay monthly salaries, while the airline’s employees have not been paid in two months.
“There are some SOEs which are not deserving of any funding at all and we’ll be making a big mistake if we continue to fund them purely on the basis that they’re state-owned,” Mboweni said.
“Am I going to promise you that there’ll be no sales of any SOEs? The answer is no, because there will be sales, and that is privatisation.
“There will be sales of some of the poorly functioning SOEs and we need to grab the bull by the scruff of its neck and deal with this matter.”
SAA unions have decided to remain mum about the potential sale of a SAA stake to private equity partners. Their concern was to save as many jobs as possible, while the coronavirus threatens to collapse the industry.
Labour law expert Michael Bagraim said the government’s plan to open a new airline did not make any sense when the aviation industry was struggling. “The government has shown that it is incapable of running an airline. To open a new one would be ludicrous,” he said.
“Airlines all over the world are going bankrupt. South Africa cannot afford to throw money down the drain trying to start up an airline.”