SAA in tough talks to cut 10% of jobs

Turnaround plan broaches idea of strategic equity partnerships

SOUTH African Airways’ plans for profitability include firing more than 10% of staff by September, a frank, concise and hard-hitting corporate plan tabled in parliament has revealed.

The plan puts SAA’s predicament plainly: “In recognition of SAA’s weakened competitive position and financial performance, radical steps are required to recover lost time in implementation.”

SAA employs about 12 000 people, which means more than 1 000 jobs could be slashed at the loss-making national carrier that has long been kept afloat by state bailouts as the government dithered over tough cost-cutting decisions.

“Organisational restructuring, resulting in a headcount reduction of 10.5% by September 2015, yielding in excess of R900-million in savings over the next three years,” is proposed.

The risk of labour action is raised in the plan, which also said “formal labour consultations have commenced”.

No pilots will be fired, and the jobs of all employees of profitmaking low-cost subsidiary Mango are safe.

This week, the South African Transport and Allied Workers’ Union (Satawu) and Solidarity expressed confidence that negotiations could result in fewer layoffs if management agreed to other measures such as cutting its loss-making routes to Beijing and Mumbai.

FINALLY, A PLAN: SAA CEO Nico Bezuidenhout

Although both Satawu’s Zenzo Mahlangu and Solidarity’s Zirk Gous expressed confidence in SAA CEO Nico Bezuidenhout, the negotiations, which are expected to wrap up on the July 22, are said to be very tough.

Mahlangu said court action was looming to prevent layoffs and hardship for employees’ families.

Of the other cost-cutting exercises proposed, the most controversial is probably the plan to cancel the remaining 10 Airbus A320 deliveries scheduled for financial years 2016 and 2017.

These would be replaced with five Airbus A330 aircraft to complement the existing six A330 units within SAA’s fleet.

Beneath the veneer of the careful officialese used in the report, clearly evident is the frustration over the government’s unwillingness to make unpopular but necessary decisions in time, thereby worsening the effect of the painful decisions by delaying them.

Last year, Public Enterprises Minister Lynne Brown, who replaced Malusi Gigaba after the elections last year, declared herself ready to enforce tough decisions.

SAA was promptly moved from her department to the National Treasury by President Jacob Zuma, who is closely associated with SAA board chairwoman Dudu Myeni.

SAA will meet the Treasury to discuss its cost-cutting plans, which also include the immediate restructuring of airline food service provider Air Chefs as a non-core business.

Another intervention, the plan states, is to consider strategic equity partnerships to improve the balance sheet, but this decision depends on the shareholder — the government.

In the plan, SAA reiterates its concerns on oversupply in the local air travel market, the effect of low-cost airlines on SAA sales, competition especially by Middle Eastern airlines on longhaul international routes, and losses SAA incurs by operating certain international routes.

On the bright side are opportunities presented by growth in the lucrative African market, and the potential for improvement should the government implement the recovery plans presented to it.