Public enterprises dept calls on creditors to support SAA rescue plan

The department of public enterprises (DPE) called on creditors and stakeholders of South African Airways (SAA) to vote in support of the airline’s business rescue plan.

This follows when one of SAA’s creditors, SA Airlink, described the proposed turnaround plan for the airline “a sham and a fraud on the creditors”.

In a statement, the department said rather than opting to liquidate SAA, voting in support of the rescue plan would mean that the airline could restructure.

“As the shareholder on behalf of government, the DPE 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,” the department said.

With the airline’s business rescue practitioners (BRPs) set to meet the creditors on Thursday, 25 June 2020, the department said that 75% in votes was needed to be carried in favour of the rescue plan.

It was reported that the National Union of Metalworkers of South Africa (Numsa) and the South African Airways Cabin Crew Association (SACCA) had planned to interdict the creditor’s meeting through court.

“Should creditors vote not to support the business rescue plan, SAA would face liquidation and they would receive substantially less for debts owed to them.

“There would be a loss of opportunities to provide the new airline with technical, financial, and operational expertise and overall future business partnerships and the severance benefits to retrenched employees would be capped across the board, regardless of years of service,” it added.

The department further said employees would receive a capped severance settlement of R32,000 and lose all other benefits, should the airline be liquidated.

“On the other hand, 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 own 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 interest of the displaced workers.

“The DPE further supports the provisions of the Companies Act, which prescribes 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, in a manner which maximises the likelihood for it to continue to exist on a solvent basis.”

The department said that the government had made R5.5 billion available to the SAA’s BRPs to augment the revenue of the airline, develop a detailed business rescue plan and consult with creditors.

It added that the R5.5 billion was also available to other affected stakeholders like employees, shareholders, board and management of the company under business rescue.

Meanwhile, the Democratic Alliance (DA) called on the airline’s business rescue practitioners to release the “long-overdue” business rescue plan.

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