The Department of Public Enterprises (DPE) has urged creditors, employees and other stakeholders of South African Airways (SAA) to vote in support of the business rescue plan of the airline to avoid liquation.
“It is the only pathway for rescue and restructuring of SAA,” the department said.
DPE said it believes the approval of the business rescue plan would help creditors and employees to be "co-creators" of a new airline and ensure a strong base is maintained for the growth of the local aviation industry.
SAA Business Rescue Practitioners (BRPs) have scheduled a creditors' meeting on 25 June to vote on the business rescue plan.
“A vote in favour of the plan by 75% of the voting interests would be required to carry the vote,” DPE said.
The DPE is of the view that a positive vote to finalise the business rescue process would be the most expeditious option for the national carrier to restructure its affairs, its business, debt and other liabilities, resulting in the emergence of a new viable, sustainable, competitive airline that provides integrated domestic, regional and international flight services.
“Should creditors vote not to support the business rescue plan, SAA would face liquidation,” the department explained.
The DPE has since highlighted the disadvantages of the liquidation of the airline. According to the department, creditors would receive substantially less for debts owed to them by SAA.
“There would be a loss of opportunities to provide the new airline with technical, financial and operational expertise,” the department said.
Meanwhile, the future business partnerships and the severance benefits to retrenched employees would be capped across the board, regardless of years of service.
“Should SAA be liquidated, every employee, no matter the number of years spent at the airline, will receive only a capped severance settlement of R32 000 and lose all other benefits,” DPE said.
However, a restructuring process would offer severance and retirement packages based on years of service, the opportunity to re-employ skills for displaced employees in the future and opportunities to start their businesses as service providers for a new airline.
“For the DPE, the finalisation of the business rescue plan and the emergence of the new airline would allow unions and other key stakeholders, who have deep knowledge of the sector, to be co-creators of a new airline, as well as coming up with novel ways of addressing the interests of the displaced workers,” the department said.
The department said it supports the provisions of the Companies Act, which prescribe that the primary function of a business rescue process is to develop and implement a rescue plan, with the view of fundamentally restructuring the business affairs and other liabilities of a company in distress, so as to maximise the likelihood for it to continue to exist on a solvent basis.
“That is why government has made funds available to the BRPs – R5.5 billion to augment the revenue of SAA – to develop a detailed business rescue plan, to consult with creditors, other affected stakeholders like employees, the shareholder, the board and management of the company under business rescue,” said DPE.
Government is committed to supporting a competitive, viable and sustainable national airline and wishes to engage constructively towards the national interest objective of such an airline in a constrained fiscal environment, taking into account the impact of the COVID-19 pandemic on this situation.