Business rescue is a one-way ticket for SAA
Placing South African Airlines into business rescue was the only move left in a chaotic chess game which has, for now at least, staved off an ending that would reportedly see over 11,000 jobs shed and another 470,000 employees directly or indirectly affected. In November, the unions won their battle for an almost 6% wage increase. But while they won the battle, their actions may yet cost them their livelihoods in the long run. The eight-day strike cost the debt-ridden national airline some R50m a day, and destroyed what little reputation it had left. Ticket insurers have run for the hills and customers are travelling on other airlines they know to be reliable and safe. The strike pushed the beleaguered airline and all its associate companies to the brink of collapse.
Faced with the inevitability of winding up the company, the board opted for a last-ditch effort at saving the national airline. Business rescue is, on paper, a good idea. It places a moratorium on the rights of all claimants against the company and buys it some time to develop a restructuring plan and find funding to dig itself out of a very deep, dark hole.
But it is a double-edged sword. All control of the company is relinquished to the business rescue practitioner, who is answerable only to the high court. The board of directors and management have no control left and are accountable to the practitioner.
If the business practitioner feels right at the beginning of the process that there are no prospects of success, they have little choice by law other than to apply to wind up the company. Similarly, if the practitioner decides at any point that they do not enjoy the co-operation of the board or management, or if the requisite funding to pay the debts of the company cannot be found, they have a duty to apply to wind up the company.
There is no point where the government, the board or management can change their minds and resume control of the company. This is a “do or die” chess move.
The unions are already baulking at embarking on this process because of the loss of control it represents. By putting the national carrier into business rescue, a journey towards checkmate has just begun.
It’s going to be an interesting ride.
There is no point where government, the board or management can change their minds and resume control of the company