SAA strike ‘a perfect storm’

Weeks after the National Union of Metalworkers of South Africa (Numsa) achieved its “victory” over South African Airways (SAA), scoring a 5.9%, wage increase, the national carrier has been placed under business rescue.

Numsa and the South African Cabin Crew Association (Sacca) were on strike for eight days over wages and possible retrenchments. This forced the already financially burdened airline to ground several flights and resulted in bookings being cancelled, among its other problems. According to SAA, the strike cost it R52 million a day.

The cash-strapped national carrier had been in a dire states since 1999 due to mismanagement and government interference. It last released annual financial statements two years ago.

The strike created the perfect storm for the airline to go into business rescue.

Jannie Rossouw, professor of economics and head of the School of Economic and Business Sciences at the University of the Witwatersrand, says the strike was “the straw that broke the camel’s back”.

“[It] definitely forced the government’s hand ... so trade unions should be careful in their demands. This is a very serious lesson.”

In a statement released last Sunday, Minister of Public Enterprises Pravin Gordhan said the strike had damaged the airline’s reputation and that it would need to go through “radical restructuring” to ensure its operational sustainability.

SAA was in the process of trying to secure a R2 billion loan with a government guarantee in order to keep it in the air, which is what lenders were looking for.

Then the strike action hit, causing a delay in initialising the required R2 billion and increasing the amount of money needed. SAA’s problems include: The strike caused jitters in the market and among passengers;

With news of the liquidity crisis, insurance companies began to cancel their underwriting of SAA tickets. International insurance companies also cancelled their underwriting of SAA tickets.

The airline began to see a massive decline in new bookings.

The unions have yet to respond to the news.

Meanwhile, SAA’s staff and passengers are in a bind.

The carrier battled to pay its employees in November and has accepted payments for tickets it might not be able to honour.