BUSINESS MAVERICK

SAA wields the sword; trade unions push back

By Sasha Planting 6 February 2020

(Photo: EPA / Kim Ludbrook)

With time ticking away, SAA’s joint business rescue practitioners are liberally cutting away at SAA in an effort to conserve cash and make the airline sustainable and more attractive to strategic equity partners; the unions are appalled.

SAA business rescue practitioners Les Matuson and Siviwe Dongwana have wielded the sword on SAA routes, cutting domestic routes down to one, international to five and regional routes to 12 in their ongoing quest to transform the airline into a sustainable and profitable business.

The consequence is that between 900 and 1000 jobs will be shed.

The table below shows the route network going forward. SAA will cease flying to the named destinations on 29 February 2020. Ironically, this is a leap day, a day meant to be unlucky for salaried workers. 

While the business rescue plan will only be presented at the end of February, the nature of the cuts hints that SAA will focus its energy and effort on developing itself as a global airline with a strong regional bias.

Regional markets are still largely protected by their governments, keeping prices higher and making competition less intense.

SAA was not competitive on many of its global routes where competitors like Emirates, Etihad, Qatar and Ethiopian Airlines are making inroads into markets once dominated by the likes of KLM and British Airways. It makes sense, for instance, to have just one destination in Germany and it makes sense to cull routes to the East where airline substitution is plentiful. 

Unfortunately, cutting the Hong Kong route put paid to SAA’s daily flights to São Paulo – which were fed by passengers disembarking from Hong Kong.

The US market is less well-served from South Africa, and SAA may be hoping to develop a strategic advantage in this regard.

Cutting the domestic routes, bar Cape Town which is profitable, also makes sense. SAA was not competitive when compared to Safair, which is gaining traction in the market, Comair and Mango. The domestic airlines, in particular Mango, will step into the breach where it makes commercial sense.

Aside from making strategic changes to SAA’s route network, the airline is deploying more fuel-efficient aircraft, simplifying its organisational structure and renegotiating key contracts with suppliers.

These are just some of the hard yards. But cutting the route network in half is not enough. SAA must focus on cutting central overheads, says Gidon Novick, former CEO of Comair. 

“Cutting the routes will affect pilots, cabin staff, ground crew and technicians. At the same time, central departments like HR, finance and marketing will have to be cut to fit the scale of the new organisation.”

BR practitioners Matuson and Dongwana have been locked in consultations with trade unions and have advised that retrenchments are likely. 

“It is our intention to restructure the business in a manner that we can retain as many jobs as possible. This will help provide a platform to a viable and sustainable future. However, a reduction in the number of employees will, unfortunately, be necessary,” they said in a statement.

But Zazi Nsibanyoni-Mugambi, spokesperson for the SA Cabin Crew Association (SACCA) says the union will not take this lying down and may interdict the business rescue practitioners from continuing with the process. 

“We are seeking legal advice. We can’t sit back and watch half the employees at SAA lose their jobs. This is not to be problematic or troublesome…but if it means an interdict we will interdict, if it means the removal of people that are not there to seek a fair open transparent process then that will be determined,” she told eNCA’s Jeremy Maggs following the announcement on Thursday 6th February 2019. 

While the union is not opposed to job cuts, “we want an inclusive process, we want to be there to understand the decisions that are being taken. We have been in consultation, yet the news of the route cuts went out to the employees and media… we are also vested stakeholders in this process.”

SACCA will issue a statement on their intentions on Friday, she said.

At this point, there is no specific mention of disposal of Air Chefs and SAA Technical. 

“To improve the airline’s liquidity, rationalisation programmes are under consideration for SAA’s subsidiaries, as well as the sale of selected assets,” Matuson and Dongwana said. “The BRPs will continue to explore viable investment opportunities with potential investors in respect of SAA.”

All customers booked on any cancelled international and regional routes will receive a full refund. Customers booked on cancelled domestic flights will be re-accommodated on services operated by Mango.

SAA does not intend to make any further significant network changes. Passengers and travel agents can, therefore, feel confident about booking future travel with South African Airways, they said. BM

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