SAA business rescue

SAA / Image via Adobe Stock

SAA creditors urged to vote in favour of BRP plan by DPE

The Department of Public Enterprises has encouraged all stakeholders involved in the SAA business rescue saga to support the proposed plan.

SAA business rescue

SAA / Image via Adobe Stock

The Department of Public Enterprises (DPE) has urged South African Airways’ (SAA) creditors, unions and all other stakeholders in the broke state-owned enterprise to vote in favour of the business rescue plan that has been devised in a bid to salvage it from the depths of insolvency. 

A meeting between SAA’s executive, it’s many creditors and the unions who represent the thousands of people set to become retrenched is scheduled to take place on Tuesday 14 July. 

The DPE said that a vote in favour of the plan devised by Business Rescue Practitioners (BRPs) is the only way all stakeholders can emerge positively from the chaotic saga.

SAA business rescue plan ‘only realistic option’ 

In a statement released on Monday 13 July, the DPE said that following the agreement between BRPs and unions to accept voluntary severance packages (VSPs) for soon-to-be retrenched employees, the vote is a “landmark moment in the business rescue process. 

“The Department of Public Enterprises (DPE) calls on creditors, unions and other stakeholders to vote in favour of a business rescue plan for SAA tomorrow as it is the only realistic pathway to the restructuring of the airline and for a new national carrier to emerge from the business rescue process,” they said. 

“By approving the business rescue plan, creditors and employees will become the co-creators of a new national airline at a time when the devastating consequences of COVID-19 are causing thousands of job losses in the global aviation industry.”

They said that should creditors vote in favour of the plan, an exciting and feasible future awaits for the South African aviation industry and those who are employed within it. 

“This is the only realistic path through which creditors and employees will derive optimum benefit, either for outstanding debts due, or for severance packages that will become available to retrenched employees.”

“It is also the preferred path form which a new viable, sustainable, competitive airline that provides integrated domestic, regional and international flight services, can emerge.”

Vote requires 75% positive support to carry  

The meeting, which is set to take place on Tuesday morning, will act as a platform for stakeholders to vote on the proposed plan, with a 75% vote in its favour required for it to carry. A vote to reject the plan would result in the airline facing imminent liquidation. 

“Cabinet has expressed its support for the concerted effort to mobilise funding from various sources to finance the business rescue plan, including from potential equity partners for the uptake of the new airline,” the DPE said. 

“Any further delays of the creditors vote or a vote to reject the business rescue plan, will put severance benefits for employees, the retention of 1 000 jobs and settling outstanding debts with creditors at risk. It will also increase uncertainty for creditors, SAA employees and potential investors.” 

“The DPE believes a positive vote to finalise the business rescue process would be the most expeditious option for the national carrier to restructure its affairs, its business, debts and other liabilities.” 

Liquidation option unsustainable, say DPE 

The DPE are vehemently against the liquidation of the airline, and in their statement cited various reasons why such an outcome would serve to the detriment of all involved in the battle to keep SAA afloat. 

“As the shareholder on behalf of government, the DPE has highlighted the disadvantages of the liquidation of the airline: creditors would receive substantially less for debts owed to them by SAA, there would be a loss of opportunities to provide the new airline its technical, financial, and operational expertise and overall future business partnerships and severances benefits to retrenched employees would be capped across the board, regardless of years of years of service,” they said. 

“Should SAA be liquidated, every employee, no matter the number of years spent at the airline, will receive only a capped severance settlement of R32 000 and lose all other benefits.” 

They said that the far superior option – a vote to instigate the business rescue plan – would serve the best interests of employees above all else. 

“A restructuring process would offer severance and retirement packages based on years of service, the opportunity to re-employ skills for displaced employees in the future and opportunities to start their own businesses as service providers for a new airline.”

“For the DPE, the finalisation of the business rescue plan and the emergence of the new airline would allow unions and other key stakeholders, who have deep knowledge of the sector, to help form a new airline as well as coming up with novel ways of addressing the interests of displaced workers.”

“Government is committed to support a competitive, viable and sustainable national airline and wishes to engage constructively towards the national interest objective of such an airline in a constrained fiscal environment, taking into account the impact of COVID-19 pandemic on this situation.”