Insolvent SAA cannot afford the 5.9% wage increase it has signed
SAA, which is back on its full flight schedule after a bruising weeklong pay strike, has reiterated that it will not be able to fund the 5.9% wage hike.
The increase will be paid to employees on the February 2020 payroll and backdated to April 1 2019, subject to availability of funds.
In a joint statement the National Union of Metalworkers of SA (Numsa) and the SA Cabin Crew Association (Sacca), which were demanding an 8% across-the-board wage increase, hailed the agreement as a victory.
But SAA spokesperson Tlali Tlali said on Sunday the increase for the airline’s total bargaining unit will be about R72m a year. He said it had been indicated to the unions that SAA cannot “currently afford the increase as a result of its precarious financial position”.
Business Times reported that the airline will know on Monday if it will get the R2bn bailout for working capital to fund its daily operations, including the payment of salaries to employees. This after lenders and SAA’s shareholder met on Friday over additional state guarantees that financiers want before they will agree to unlock funds.
Tlali, who stated that all employees were back at work, said SAA’s long-term turnaround strategy was always premised on a capital injection of R21.7bn to recapitalise the company.
“To date we have received R10.5bn. If recapitalisation is received the company would obtain working capital funding in the normal course of business to manage its operations.”
The weeklong industrial action cost the cash-strapped national carrier about R52m a day, undermining President Cyril Ramaphosa’s administration’s efforts at reining in cash-burning state-owned enterprises (SOEs) and addressing government’s worsening fiscal and debt trajectory.
Ratings agency S&P Global changed its outlook on SA’s sovereign credit from stable to negative on Friday, saying low GDP growth, upwardly revised fiscal deficits and a “a growing debt burden are damaging SA’s fiscal metrics”.
Economists.co.za chief economist Mike Schussler said the wage increase, if workers do get it, will be seen as “credit negative” for SA. “This is a company that’s deep in financial crisis, the increase is way above inflation and it’s not good for SA,” said Schussler.
“The wage agreement looks wishy-washy to me. The workers lost a week’s earnings and they will only get the increase if there’s money in February, but we know there won’t be any money.”
Schussler said taxpayers could not keep on bailing out SAA. The airline has received more than R20.5bn of fiscal support over the past three years. “That money can be spent on service delivery programmes. I think we have reached a point where we have bailed out our SOEs one too many times.”
Guy Leitch, an aviation expert and editor of the SA Flyer and FlightCom magazines, told Business Day on Sunday that the agreement will result in SAA falling further into the debt sinkhole.
“SAA is living on bailouts so it cannot afford the increase, let alone an increase above CPI (consumer price index),” said Leitch. Instead of continuing to bail out SAA, the state should be using the funds to provide services to the poor, he said.
Finance minister Tito Mboweni has previously suggested that SAA should either be sold or closed down as it did not have a future in its current form.
But Leitch said the airline could not be sold because “it is not worth anything”, noting: “The rough estimate is that it’s got R100bn of liabilities and about R10bn of assets, which are extremely hard to quantify. The airline is insolvent. It is losing R500m a month and R6bn a year.”
SAA has posted more than R18bn in losses since the 2015 financial year.
Friday, November 15 — SAA grounds its aircraft, messing up the travelling plans of thousands of its customers, after unionised workers downed tools in support of their demands for an 8% wage increase, end to outsourcing, and job security for three years. The employer offers 5.9% deferred to April 2020.
Saturday, November 16 — The parties approach the Commission for Conciliation, Mediation and Arbitration (CCMA) to try to find agreement.
Sunday, November 17 — SAA resumes flying to international destinations including the US, the UK, Brazil and Hong Kong.
Monday, November 18 — The parties meet public enterprises minister Pravin Gordhan in an effort to find an amicable solution to the dispute. He tells the unions there is no money to fund their wage demand.
Tuesday, November 19 — SAA resumes flying to Accra, Lagos, Lusaka, Maputo, Windhoek and Harare.
Wednesday, November 20 — A number of striking workers approach SAA and indicate their willingness to return to work in defiance of the crippling strike; Gordhan tells MPs that the airline does not have enough cash to “possibly even pay salaries at the end of the month”.
Thursday, November 21 — The airline announces it ill not be able to pay salaries for November on time.
Friday, November 22 — The strike ends after the parties reach a 5.9% wage agreement deferred to February 2020.
Saturday, November 23 — SAA says it will operate a “near normal service” as it resumes full operations.
Sunday, November 24 — SAA resumes its full schedule of domestic, regional and international flight route network.