An SA Express aircraft. Picture: GALLO IMAGES/GETTY IMAGES/BRIAN BAHR
An SA Express aircraft. Picture: GALLO IMAGES/GETTY IMAGES/BRIAN BAHR

SA Express employees have been told they will not be paid and that they must not return to work, as their contracts of employment were suspended due to the provisional liquidation of the embattled state-owned airline.

In a letter sent to the airline’s more than 600 employees last Friday, the liquidators announced the immediate suspension of the contracts.

SA Express is nearing the end of its 26-year existence and is set to be the first state-owned enterprise (SOE) to be abandoned by a cash-strapped government that has run out of fiscal room for bailouts.

The airline, which owes creditors more than R2bn, was placed under provisional liquidation at the High Court in Johannesburg on April 29 after its business rescue practitioners, Phahlani Mkhombo and Daniel Terblanche, argued that it had no prospect of survival.

The final liquidation hearing is expected to take place on June 9. All interested parties have until then to provide reasons to the court on why the airline should not be liquidated.

SA Express, one of the state-owned companies decimated during a decade of state capture, was put into business rescue — a form of bankruptcy protection that seeks to rehabilitate a financially distressed company — after one of its creditors had brought a successful court application in February.

The rescue practitioners applied for liquidation after the government had denied them further funding.

The airline’s demise has also been accelerated by the Covid-19 pandemic, which has grounded the global aviation industry. SA Express suspended operations in March as the country entered into a national lockdown to contain the coronavirus, which closed the country’s skies.

The airline has been unable to pay staff salaries for March.

SA Express did put in an application to receive money from the UIF to pay salaries, but only received a partial payment.

SA Express liquidators have warned employees that if the business is not sold as a going concern within 21 days of the appointment of a final liquidator, their contracts may be terminated and they will be entitled to preferent claims in terms of the Insolvency Act.

The act provides that all employees have a preferent claim of up to R12,000 for salaries and wages and R4,000 in respect of leave pay, or any other form of paid absence and R12,000 in respect of retrenchment pay.

They said these claims would be paid from the free residue funds established once all secured creditors had been paid. Dividends in respect of claims were paid to creditors only after the confirmation by the Master of the High Court of a liquidation and distribution account.

The liquidators said all contracts of service not already terminated shall, unless the liquidator and the employees have agreed on continued employment, automatically end 45 days after the appointment of the final liquidator.

quintalg@businesslive.co.za