Knives out for Ngqula
Management siphoned R72m from its coffers under guise of retention premiums
IF SOUTH AFRICAN AIRWAYS’ loss of R883m for its financial year 2006/2007 is a proxy of the national carrier’s failed restructuring strategy, company CE Khaya Ngqula will have an even tougher time explaining the contrast between rightsizing the business and the apparently hefty “retention premiums” allegedly doled out to its senior managers.
A recent assessment of SAA’s governance standards by the South African Transport & Allied Workers’ Union (Satawu) revealed among other things that while the airline’s key technical employees have been forced to forfeit a number of benefits as part of a broader shake-up to stabilise its bottom line, senior managers – including Ngqula – have received bonus payments disguised as “retention premiums”.
“Satawu can confirm that 128 SAA senior executive managers – including the CEO, chief financial officer and the GM of human resources, among others – have been paid ‘retention premiums’ effective December 2007. The total amount to be paid over a three-year period is R72m spread among agreed categories of managers under the guise of being retained,” Satawu secretary general Randall Howard alleges.
The contrast reflects – to the extent it can be explained – the incongruity of a turnaround plan that’s seen Ngqula request three consecutive handouts from Government since he took over the controls, the most recent being a R5,7bn capital injection to give SAA a less geared 35:65 debt to equity ratio (See Finweek, 24 July 2008).
It’s unclear at this stage whether the board, SAA’s executive and the Department of Public Enterprises (DPE) are aware of – or were party to – the decision. Howard says that’s the subject of another probe. Meanwhile, Satawu has called for Government to remove Ngqula. Howard cites as Satawu’s reason the results of the union’s assessment of SAA, which paints a damning picture of an organisation torn apart by sloppy governance standards, unethical business practices and mismanagement.
Though he sidesteps the issue of “retention premiums” Ngqula – who is angling for another bonus – insists he won’t bow to any pressures. “My board hasn’t communicated anything to that effect. I intend to serve the rest of my contract, which runs through to 2010. It may seem easy to criticise but the truth is that the airline industry’s become a challenging industry. More than 50 carriers folded over the past year.”
Ngqula has instead blamed the spiralling crude oil price – which wiped out around R950m in unbudgeted costs from SAA’s bottom line – for its financial woes. That may be true. However, Satawu blames management for a failed restructuring exercise, which in turn led to an exodus of key technical skills – mostly pilots.
Howard says restructuring has simply meant diminished capacity to fly SAA back into the black. “This kind of greed, double standards and arrogance on the part of management to a large extent explains the company’s precarious financial position. While we accept the argument regarding crude oil prices, should employees always bear the brunt of those processes while management lines their pockets?”
Since adopting its restructuring plan 18 months ago, SAA has lost almost 60 pilots to competitors. As part of their sacrifice to help the airline return to profitability, Cathy Bill, manager of the SAA Pilots’ Association, a staff association representing their interests, says aircrew made major wage concessions that may have potentially shaved R150m off the airline’s costs. Those include a R1 000 drop in uniform allowance, a 5% productivity rise and having their sick leave slashed. The pilots also agreed to the suspension of a parity agreement for three years, effective April last year. Their rates for overtime were also reduced from 1,5% to 1,25% times overall income. Bill adds that the majority of departed pilots cited disillusionment with the restructuring process as the key reason for quitting SAA.
Although acknowledging that poor working conditions have thrown its pilots into terrain vulnerable to poaching, SAA GM for human resources Bhabhalazi Bulunga is quick to dismiss the restructuring argument. “We don’t have any proof to suggest that restructuring was the prime reason for pilots leaving SAA. As far as we’re concerned we offered severance packages to all SAA staff. And our records show that a number of the departed employees (including some pilots) accepted the severance packages on offer.”
Yet Bill insists only five of the pilots who left accepted management’s offer of severance packages. But SAA Technical (SAAT) – a division responsible for the maintenance, repair and overhaul of all SAA’s aircraft, plus engineering work on other airlines’ aircraft – has been the hardest hit by the skills exodus. SAAT lost around 372 technicians, accounting for more than 25% of its 1 405 overall headcount.
Received a disguised bonus. Khaya Ngqula