Creditors Approve S.Africa's SAA Rescue Deal As 2,700 Jobs Shed

Johannesburg, (UrduPoint / Pakistan Point News - 15th Jul, 2020 ) :Creditors of South Africa's flag carrier SAA approved Tuesday a restructuring plan for the cash-strapped airline in a deal that will cost some 2,700 jobs, the government said.

Loss-making South African Airways (SAA), one of the continent's largest airlines, was placed under a state-approved rescue plan in December in an effort to save it from collapse.

It is to be replaced by a new and competitive airline after years of mismanagement and debt.

At least 2,700 of its roughly 5,000 workers will be laid off.

"At a meeting convened by the business rescue practitioners (BRPs) for SAA, 86% of creditors voted to support a business rescue plan for the airline," said the Department of Public Enterprises in a statement.

The government said it believed that the decision was "a much better outcome for creditors and SAA employees than liquidation".

"The department hopes that a new SAA can reclaim market share while fighting to compete more in the emerging market space - notwithstanding the impact of the COVID-19 pandemic that will constrain the aviation industry for some time into the future," it said.

The government says the plan will cost some 10 billion rand (about US$600 million) although the opposition Democratic Alliance, which is fiercely opposed to the plan claimed "taxpayers will now have to fork out another 16.

6 billion rand to fund this vanity project".

Of its total workforce, 1,000 will be retained and another 1,000 furloughed.

The two main unions which led National Union of Metalworkers of South Africa (NUMSA) and the South African Cabin Crew Association (SACCA) qhich led a costly week-long wage strike in November that forced hundreds of flight cancellations, gave a guarded welcome to the restructuring plan.

"Although we are not entirely satisfied with the plan and will deal with the shortcomings in due course, we are relieved that the drawn-out and rather wasteful business rescue process is now coming to an end," they said in a statement.

"We have fought very hard to prevent the liquidation of the airline and we are relieved that this strategic state owned entity ...has been saved from total collapse." SAA is Africa's second-largest airline after Ethiopian Airlines.

It has a fleet of more than 50 aircraft flying to domestic and international destinations.

Like most South African state-owned enterprises, it has failed to make a profit for more than a decade and survived on government bailouts.