South African Airways Offers Severance Packages To Entire Workforce, Government Rescue ‘Unlikely’

South African Airways Offers Severance Packages To Entire Workforce, Government Rescue ‘Unlikely’

South African Airways
South African Airways has offered severance packages to its entire workforce of around 4,700 employees as a bailout from the government remains “unlikely”. Image: Christopher Griner/Flickr

South African Airways said that all of its 4,700 employee contracts will be terminated on April 30, according to an internal airline statement seen by Reuters.

The state-owned airline is the latest victim of the coronavirus pandemic and its devastating economic impact.

Failing to reach an agreement for more government funding, South African Airways is threatening to send the airline into total collapse, according to Bloomberg.

All 4,700 employees are entitled to one week’s pay for every year of service, one month’s pay in lieu of notice pay and pay for outstanding annual leave. The airline will need to sell its assets to pay the proposed severance packages.

Two labor unions representing the airline’s employees have rejected the planned mass layoffs, IOL reports.

Union members were instructed to ignore the offers as the labor unions engage directly with the airline and the government.

The 86-year-old airline declared bankruptcy in December 2019 in an effort to save itself from liquidation.

The internal airline statement said that it was “unlikely that the company will be successfully rescued as a result of the business rescue process”.

In the past, South African Airways was considered Africa’s best airline with highly publicized international awards. Since, 2011, the airline has struggled with financial losses and has not made a profit. It has received more than $1.1 billion in bailouts in the past three years, according to Reuters.

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South African Finance Minister Tito Mboweni inadvertently provided an indication that the national airline would be shut down when his speaking notes were released ahead of a teleconference with journalists on April 15.

In his notes, Mboweni talked about the “closure of SAA” among a set of reforms, according to SundayWorld. In his final remarks, however, the airline’s closure was not mentioned and instead, he referred to the “consolidation of public entities and reviewing our portfolio of state-owned enterprises.”

South African Airways has relied heavily on government support to keep operating. A request for a $533 million bailout was rejected in mid-April, SABC reported.

The South African government says that it turned down the request for further funding from the bankrupt airline as the country’s resources have been stretched by the continued fight against the coronavirus pandemic.

The coronavirus could be the final nail in the coffin for the South Africa carrier, which was reducing routes and considering job cuts even before the outbreak forced airlines around the world to ground planes, according to Bloomberg.

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The COVID-19 virus has infected 3,158 people in South Africa, with 54 deaths.

Apart from some chartered repatriation and cargo flights, South African Airways’ operations — like those of many other airlines globally — have come to a halt due to coronavirus travel bans.

Many of the world’s airlines could be bankrupt by May because of the COVID-19 pandemic, according to aviation consultancy Capa.