SAA to start job cuts?

[Rotorblade]

SOUTH AFRICAN AIRWAYS EMBARKS ON A RESTRUCTURING PROCESS WHICH MAY LEAD TO JOB LOSSES

JOHANNESBURG, November 11, 2019 - South African Airways has informed all its 5146 employees that it is embarking on a restructuring process which may lead to job losses.

Acting Chief Executive Officer, Zuks Ramasia said the airline has commenced a consultation process with all employees in line with section 189 of the Labour Relations Act. The act requires an employer to consult with recognised labour unions and keep abreast employees who may be affected by the restructuring process.

Although the process may lead to retrenchments, Ramasia said SAA hoped to minimise the impact while offering support to those who would be directly affected.

She said SAA has faced numerous challenges over the past few years culminating in the current grave situation. The challenges include, funding and liquidity challenges; inability to borrow indefinitely without repaying debt; high interest costs on loans; volatile and fluctuating fuel price; currency volatility; insufficient revenue and cash generation in relation to operating cost; ageing fleet which is expensive to maintain and is fuel inefficient, making it difficult for SAA to compete in the market place; and aggressive international and regional competition for revenue stimulation and network optimisation.

“In addition, SAA’s balance sheet has historically been weak and remains so despite recent substantial capital injections from the government. Our continued losses and reliance on government guarantees to borrow money from lenders, have increased the interest costs which impacts the operating cost of the business.

“We urgently need to address ongoing lossmaking position that has subsisted over the past years. That is why we are undergoing a restructuring process that seeks to ensure effective implementation of the accelerated Long Term Turnaround Strategy amidst the present prevailing operational challenges.

The scope of the restructuring encompasses all SAA divisions and departments and excludes the subsidiaries; SAAT, Mango Airlines and Air Chefs,” she said.

Ramasia said as at 1 November 2019, SAA had a total workforce of 5 149 globally. It is difficult to estimate the number of employees who may eventually be impacted. No final decision will be taken until the consultation process is concluded. However, it is estimated that approximately 944 employees may be affected.

In terms of the Labour Relations Act, SAA and representative trade unions may agree to select a facilitator or alternatively, request the Commission for Conciliation Mediation and Arbitration to facilitate the consultation process, which may last until 11 January 2020.

Ramasia said during the consultation process, SAA will engage meaningfully with the recognised unions and affected employees on: appropriate measures to minimise the number of retrenchments; mitigate the adverse effects of the retrenchments; the method for selecting the employees to be retrenched; the severance pay for employees that may be retrenched; affected job categories; and the timing of retrenchments due to operational requirements, if required.

“These hard decisions were necessary to put SAA on a more sustainable footing while ensuring we continue to offer customers the best service. It is a matter of great regret that that we will part ways with some loyal colleagues. We are taking all possible steps to ensure these changes are managed in a caring manner and that everyone is treated with dignity,” said Ramasia.

5146 is an unusual number of employees for SAA - the more commonly accepted figure is 10,000 but I guess that includes SAAT and Mango and Air Chefs, but even so 5146 is low for SAA?

[evanb]

5146 is a not a usual number of employees for SAA - the more commonly accepted figure is 10,000 but I guess that includes SAAT and Mango and Air chefs, but even so 5146 is low for SAA?

At the end of March 2017:
SAA 5,752
SAAT 2,367
Mango 713
Air Chefs 1,237
SATC 2
Total 10,071

So between now and then they've already reduced the workforce at SAA by over 10%.

[GL]

5146 is a not a usual number of employees for SAA - the more commonly accepted figure is 10,000 but I guess that includes SAAT and Mango and Air chefs, but even so 5146 is low for SAA?

At the end of March 2017:
SAA 5,752
SAAT 2,367
Mango 713
Air Chefs 1,237
SATC 2
Total 10,071

So between now and then they've already reduced the workforce at SAA by over 10%.

Indeed and a significant part of these reductions came from the cut in pilot numbers, of which I believe about 175 have taken contracts or retired. An unanticipated irony is that I believe the non white and non male pilots were a disproportionately large percentage of the pilots taking contracts with other airlines and thus the pilots workforce has become even more pale male.

[GL]

Huge fight coming - management says they want to cancel the SAAPA regulating 'evergreen' agreement from next March.
Also claim SAA overpaid the pilots and want the money back!

[Swartbok]

..........”SAA acting CEO Zuks Ramasia said in a statement that, among the challenges faced by SAA are funding and liquidity challenges, the inability to borrow indefinitely without repaying debt and high interest costs on loans”..........

An excerpt from a news24 article.

https://www.fin24.com/Companies/Industr ... t-20191112


Which business/person in the world wouldn’t like the ability to borrow indefinitely without having to repay debt or interest?

[evanb]

Which business/person in the world wouldn’t like the ability to borrow indefinitely without having to repay debt or interest?

Actually most large businesses and listed companies have been doing that for many decades. The low costs of capital on debt markets since the late 90s and early 2000s has meant the cost of capital with respect to debt, as compared to equity, as been so low that they have been doing just that ... borrowing indefinitely without repaying the debt.

Also, SAA said nothing about not having to repay the interest ... that they do. They just made the point about the high interest costs they are incurring given their situation.

[trees]

Huge fight coming - management says they want to cancel the SAAPA regulating 'evergreen' agreement from next March.
Also claim SAA overpaid the pilots and want the money back!

Bark ≠ bite

[HJK 414]

………….
Also, SAA said nothing about not having to repay the interest ... that they do. They just made the point about the high interest costs they are incurring given their situation.

That is a self inflicted situation is it not?
As soon as they show the capacity to re-structure and start to change the bottom line / display decent management decisions and actively attack the corruption and self enrichment through vendor / purchasing contracts - the Creditors would lower the risk profile and they would be paying a lower interest rate.

SAA have asked too many people to "trust them" with plan after plan after plan …….. and the losses simply kept on growing.
How do you expect a creditor to extend your loan / lower your interest rate if you are not even capable of producing a half decent annual account of your business. (perhaps because technically it is trading insolvent?)

JK

[Richard007]

Since the last financial information provided was March 2017 its not possible to construct a picture. It seems to have become normal practice now for these requirements to be ignored, Express have provided no financials since 2016.

If the rumoured losses of between 20-30% of turnover are to be believed then the prospects of profitability given the backdrop of SA's economic woes is zero. In their own version the potential gain from the restructure is only a fraction of the current deficit. https://www.businesslive.co.za/bd/natio ... saa-r700m/

The statement "Our continued losses and reliance on government guarantees to borrow money from lenders, have increased the interest costs which impacts the operating cost of the business." shows a lack of understanding of accounting principles. Financing cost and operating costs are accounted for separately.

For SA as a whole and for SAA the same rule applies. The longer it takes to make necessary changes the deeper you are going have to cut. The path that is clearly unsustainable has been maintained for so long it has become the norm, some seem to misinterpret that as sustainable.

The train crash is coming.

[Jfairwell]

SAA and SAX have no prospects of commercial success. It should simply be closed in an orderly fashion, say 6 to 12 months, and allow the private sector to step in. The international and regional markets won't blink and domestically the more agile airlines like Safair and Airlink will have enough time to increase capacity where necessary.

The useful / skilled employees will find alternative employment.

It's actually quite simple.

[Areaman]

SAA and SAX have no prospects of commercial success. It should simply be closed in an orderly fashion, say 6 to 12 months, and allow the private sector to step in. The international and regional markets won't blink and domestically the more agile airlines like Safair and Airlink will have enough time to increase capacity where necessary.

The useful / skilled employees will find alternative employment.

It's actually quite simple.

Common sense reigns....thank you

[tansg]

So how many of the executive management team are going to be retrenched?
Surely the accountability lies with them?

[GL]

Cabin crew and metal workers unions have already issued a strike notice.

[gregdeklerk]

SAA and SAX have no prospects of commercial success. It should simply be closed in an orderly fashion, say 6 to 12 months, and allow the private sector to step in. The international and regional markets won't blink and domestically the more agile airlines like Safair and Airlink will have enough time to increase capacity where necessary.

The useful / skilled employees will find alternative employment.

It's actually quite simple.

It would be wonderful if it were that simple, but the debt can't simply be written off and the shareholder can't fund its guarantees in one go.

[Trent772B]

SAA and SAX have no prospects of commercial success. It should simply be closed in an orderly fashion, say 6 to 12 months, and allow the private sector to step in. The international and regional markets won't blink and domestically the more agile airlines like Safair and Airlink will have enough time to increase capacity where necessary.

The useful / skilled employees will find alternative employment.

It's actually quite simple.

That will cost R40 Billion overnight