Avoiding the liquidation of South African Airways (SAA) will ensure the aviation market remains competitive and it means consumers won't be forced to be price takers, said Public Enterprises Minister Pravin Gordhan.
The minister was speaking during a briefing to the Standing Committee on Public Accounts (Scopa) on Wednesday evening.
SAA's business rescue practitioners updated the committee on its process, with Gordhan and other officials from the department also in attendance.
SAA was placed in business rescue in early December 2019; the process has been ongoing for 11 months.
Gordhan said an interim board will be announced and a core management team will be put together, to ensure there is a "sufficient weight of experience" at SAA to execute its restructure.
Gordhan stressed that there would be "no winners" if the airline is to be liquidated – bar those who might be able to "cherry pick" assets they want.
He explained that a restructure would be much better - not only for creditors and employees, but for consumers as well.
The minister explained that, if SA remains a player in the aviation space, it will ensure competitive markets, so that SA consumers won't have to be "price takers".
Already, with the pandemic, the aviation space has narrowed and airlines are raising fares, which consumers just have to accept.
"The liquidation costs are approximately the same as the restructuring costs, but the advantage of restructuring is that SA continues to maintain its presence in the aviation industry.
"It is able to retain the brand of the flag … as a shareholder, we are able to honour our commitments to labour," he said.
The restructure would also minimise the "domino effect" along the aviation value chain.
Last week, Finance Minister Tito Mboweni announced that SAA would receive R10.5-billion from the government to support its business rescue process. The funds are to be reprioritised from national departments and their public entities as well as from conditional grants of provincial and local governments.
While some political parties and others have criticised the decision, Gordhan has defended it.
In an interview with Fin24, he said the funds would assist in helping the new airline attract a strategic equity partner. The rescue plan intends to spend R2.2-billion on retrenchment costs.
Providing a breakdown of the R10.5-billion, business rescue practitioner Siviwe Dongwana explained R2.8-billion would go toward employee related payments. This includes severance packages, retrenchment packages and amounts owing to employees as a consequence of the airline not being able to pay salaries for a number of months, he said.
Post-commencement finance creditors are owed R0.8-billion and about R2-billion is allocated for working capital to restart operations. A total of R2.2-billion is set aside for refunds - or unflown tickets liability - and R2.7-billion is meant for the recapitalisation of subsidiaries, SAA technical, Mango and AirChefs.
The severance packages, in particular, will cost R2.2-billion, Dongwana explained. Of SAA's 4 647 employees, 3 246 have opted for voluntary severance packages.
A total of 1 313 employees remain, but the new airline will only require 1 000 employees.
These 1 313 employees will have an opportunity to apply for posts at the restructured airline; the remaining employees will then be subject to a s189 process as per the Labour Relations Act, Dongwana explained.