So­nan­gol de­lays pay­ments as it bat­tles to re­form

Lufthansa pi­lots’ strike dis­rupts flight sched­ule

Kuwait Times - - BUSINESS -

An­gola’s state oil com­pany So­nan­gol has amassed hun­dreds of mil­lions of dol­lars in debts and de­ferred pay­ments to oil ma­jors and con­trac­tors while its new chief, Isabel dos San­tos, at­tempts to re­form its oper­a­tions. Con­trac­tors say they have waited months even for small pay­ments from So­nan­gol, which han­dles the oil and gas re­serves of Africa’s sec­ond­largest oil ex­porter.

The de­lays be­gan fol­low­ing the ap­point­ment of dos San­tos, the daugh­ter Pres­i­dent Jose Eduardo dos San­tos, in June to root out waste and cor­rup­tion at a com­pany that was strug­gling even be­fore oil prices plunged.

As she worked to un­ravel the com­pany’s myr­iad debts and re­pay­ments, out­go­ing cheques ground to a halt. Con­trac­tors and sources close to So­nan­gol said it is months be­hind in pay­ments to nearly ev­ery en­tity it works with, from cash calls worth hun­dreds of mil­lions and smaller pay­ments of hun­dreds of thou­sands.

“They haven’t paid us, but we are talk­ing to them,” a source at one con­trac­tor told Reuters. “They’re try­ing to make re­forms but there is a cash flow prob­lem.” Sources told Reuters that those owed in­cluded Chevron , To­tal, BP, ENI and ExxonMo­bil . So­nan­gol has asked for a mora­to­rium on other debts un­til the end of the year, they said.

This is the most sig­nif­i­cant ef­fort yet to re­form the cen­tral pil­lar of sub-Sa­ha­ran Africa’s third-largest econ­omy and one of the con­ti­nent’s big­gest com­pa­nies. So­nan­gol em­ploys some of the An­gola’s most pow­er­ful peo­ple and its ten­ta­cles spread be­yond en­ergy to real es­tate and rail­ways, and truck­ing to tele­coms.

The ap­point­ment of dos San­tos was it­self con­tro­ver­sial. Her fa­ther has ruled An­gola since 1979 and gov­ern­ment crit­ics ac­cuse his fam­ily and as­so­ciates of en­rich­ing them­selves while do­ing too lit­tle to spread the ben­e­fits of An­gola’s oil wealth

Lufthansa pi­lots in Ger­many be­gan a two-day strike yes­ter­day, ground­ing some 1,800 flights at one of Europe’s largest air­lines in a long-run­ning pay dis­pute. The Vere­ini­gung Cock­pit (VC) pi­lots’ union ini­tially called a 24-hour walk­out for yes­ter­day, but ex­tended the strike for an ex­tra day af­ter two courts re­jected at­tempts by Lufthansa to halt the in­dus­trial ac­tion.

Lufthansa, led by CEO Carsten Spohr, in­sists that de­spite a record profit in 2015, it has no choice but to cut costs to com­pete with leaner ri­vals such as Ryanair on short-haul and Emi­rates on long-haul flights. Shares in the com­pany have lost 12 per­cent of their value this year, but were up 1.2 per­cent at 1309 GMT, out­per­form­ing Ger­man blue chips, which were down 0.5 per­cent.

Lufthansa can­celled 876 of roughly 3,000 flights sched­uled by its group air­lines for Wed­nes­day, and scrapped 912 flights for today, af­fect­ing over 215,000 pas­sen­gers in what is the 14th strike in the dis­pute since early 2014. Lufthansa’s CEO has said he ex­pects the strike to cost be­tween 7 mil­lion eu­ros and 9 mil­lion eu­ros ($7.4 mil­lion to $9.6 mil­lion) a day.

The strike started at mid­night and to its peo­ple. Isabel runs a multi­na­tional busi­ness em­pire that has made her Africa’s rich­est woman. A group of lawyers has filed a law­suit ac­cus­ing the pres­i­dent of nepo­tism and vi­o­lat­ing An­golan pro­bity by ap­point­ing her as head of the state oil firm. The supreme court last month or­dered him to re­spond to the in­quiry. Isabel dos San­tos has de­fended the de­ci­sion, say­ing she had been picked for her ex­per­tise and com­pe­tence.

At the start of the shake-up, she clipped the wings of the en­tire So­nan­gol le­gal de­part­ment, bar­ring them from con­duct­ing any ex­ter­nal ne­go­ti­a­tions. This may have hin­dered sort­ing out pay­ment com­pli­ca­tions.

She even booted out the hair-dress­ing and nail-bar sa­lons that had set up shop in­side So­nan­gol’s Luanda head­quar­ters to pam­per the oil ex­ec­u­tives in their lunch and cof­fee breaks, ac­cord­ing to one Luanda-based diplo­mat.

For­mer chief ex­ec­u­tive Francisco de Le­mos Jose Maria, along with the rest of the board, was re­placed in June when dos San­tos took over. Sources close to So­nan­gol said she had taken away So­nan­gol’s abil­ity to pay its own bills di­rectly. Rev­enues from oil sales now flow di­rectly to gov­ern­ment cof­fers, where pay­ments must be ap­proved be­fore they go out.

The de­lays bub­bled to the sur­face last month, when re­ports cir­cu­lated that Chevron was de­mand­ing im­me­di­ate pay­ment of $300 mil­lion in un­paid cash calls the money that So­nan­gol is re­quired to pay for oper­a­tions on oil and gas fields.

Chevron de­clined to com­ment, but the talks prompted So­nan­gol to is­sue a rare state­ment about the trou­bles. “This per­fectly nor­mal sit­u­a­tion in the An­golan oil in­dus­try is not unique or iso­lated,” the com­pany said. — Reuters af­fects flights depart­ing from Ger­man air­ports, in­clud­ing 133 long-haul flights.

Ho­tels for stranded

Flights by Lufthansa’s other air­lines, in­clud­ing Ger­man­wings, Eurow­ings, Aus­trian Air­lines, SWISS and Brus­sels Air­lines, will not be af­fected, Lufthansa said. Aus­trian and SWISS are us­ing larger planes to carry pas­sen­gers, while Lufthansa has re­served almost 4,000 ho­tel rooms in Frank­furt and Mu­nich for stranded pas­sen­gers. Lufthansa has called on the pi­lots to en­ter me­di­a­tion, which has been re­jected by their union be­cause it is first seek­ing a bet­ter of­fer from man­age­ment as a ba­sis for talks.

The union wants an av­er­age an­nual pay in­crease of 3.7 per­cent for 5,400 pi­lots in Ger­many over a five-year pe­riod from 2012. Lufthansa has of­fered 2.5 per­cent spread over the six years to 2019.

In its ef­fort to re­duce costs, Lufthansa has agreed deals on pay and re­tire­ment schemes with the main unions rep­re­sent­ing ground staff and cabin crew in Ger­many. “It is in­com­pre­hen­si­ble that the union is calling for the big­gest pay in­crease for the most well-paid group of staff,” Lufthansa board mem­ber Bet­tina Volkens said in a state­ment. — Reuters

FRANK­FURT AM: Some pas­sen­gers walk un­der a dis­play show­ing can­celled flights due to a strike of pi­lots of Ger­man air­line Lufthansa at the air­port in Frank­furt am Main, yes­ter­day. — AFP

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