The joint business rescue practitioners for financially-embattled State-owned national flag carrier South African Airways (SAA), Leslie Matuson and Siviwe Dongwana, have released a “Notice to all Affected Persons”, dated April 23, regarding the situation of the airline. This followed the decision by the government, conveyed to the BRPs on April 10, that no more funding would be provided to SAA.

Without this extra funding, the BRPs were unable to develop a business rescue plan that would have allowed SAA to be restructured so as to maximise the probability that it could become solvent again. It also meant that they could not maintain the airline at a minimum care and maintenance level until such time as the current air travel restrictions (imposed to help counter the Covid-19 pandemic) were lifted.

The BRPs stated that they had only two options left. The first was a “wind down” process for SAA. This would ensure that the airline’s creditors would get a better return than if SAA was immediately liquidated. Under this, the airline’s staff would have their employment terminated by agreement, including the agreement of severance packages. There would also be a “sales process” which would “ultimately result in a distribution of such proceeds to affected parties who are entitled thereto in terms of the business rescue waterfall”. Such an approach would quality as a business rescue plan.

However, if it was not possible to reach an agreement with SAA personnel, then any business rescue plan would be impossible. That would require the adoption of the second option – an urgent application to the Court for the business rescue to be ended and the airline placed into liquidation.

“The practitioners do not have sufficient funds available to continue honouring the obligations of SAA to its employees beyond 30 April 2020 and to bear the costs of the wind down process,” warned the BRPs in their letter. “Accordingly the wind down process … is dependent upon employees accepting the termination of their employment timeously by mutual consent.”

On April 17, the BRPs set a collective agreement before the representatives of all the unions and the non-unionised workers, for their consideration and as a basis for negotiation. They were informed that any agreement had to be achieved by April 24. Such an agreement would allow the employees to negotiate “a mutually agreed separation of employment”. So far, the government had failed to meet the BRPs request to immediately fund retrenchment packages.

The BRPs pointed out that SAA had been in business rescue for nearly five months, that the post commencement funding of R5.5-billion that had been received had been fully used in March, that on March 9 a Section 189 (of the Labour Relations Act) notice had been issued informing all staff and their unions that the airline planned to start talks to implement retrenchments, and that (following an address by the country’s President on March 15 on restrictions to counter Covid-19 and the start of a travel ban on March 18) a second notice had been issued on March 19. Furthermore, SAA charter flights to repatriate foreign citizens, agreed in early April, would be concluded by the end of April; and, with the lockdown still in place, the airline had neither the funds to continue trading nor to pay a “significant salary bill” after April.

“It is the practitioners’ view that the proposed actions outlined above provide the most responsible way for a managed cessation of the operations of the airline and managing the risks of all affected parties,” they stated. “The practitioners believe it is appropriate to consult with employees and creditors through employees’ and creditors’ committees.” Questions should be submitted to the chairpersons of the relevant committees by April 24, and the BRPs would consult with them on April 28, answering the questions “thereafter”.