South African Airways State-Led Rescue Will Allow 5.9% Wage Increase

Though there has not been any confirmation from the union as yet, part of the agreement saw a 5.9-percent wage increase backdated to April, but would only start to be paid out next year March depending on funding.

South African Airways (SAA) has been placed under a state-led rescue plan on Thursday as part of a huge restructuring step after an expensive week-long strike that hit the business last month.

Almost all the SAA workers resorted to striking on November 15 after the cash-strapped airline failed to meet the demands placed before it, which includes higher wages and job in-sourcing.

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The strike was called off just few days after the SAA management and unions eventually reached an agreement, which hopefully will see a better SAA in operation. The strike left a severe blow to the struggling airline, which according to report has not made profit since 2011 and had relied mainly on government financial support.

“The Board of SAA has adopted a resolution to place the company into business rescue,” said a statement by South Africa’s Public Enterprises Minister Pravin Gordhan, adding that the decision was also supported by the government.

“It must be clear that this is not a bailout,” said Gordhan. “This is the provision of financial assistance in order to facilitate a radical restructure of the airline.”

South Africa is battling to get state-owned companies back on track after nine years of corruption and mismanagement of fund under former president Jacob Zuma.

Inside South African Airways

South African Airways has in its employment more than 5,000 persons and is Africa’s second largest airline after Ethiopian Airlines. The company has been losing 52 million rand ($3.5 million) a day during the strike.

SAA board of directors said the business rescue, which is programmed to start immediately, was concluded after consultations with major shareholders and the public enterprises department “to find a solution to our company’s well-documented financial challenges”.

“The considered and unanimous conclusion has been to place the company into business rescue in order to create a better return for the company’s creditors and shareholders,” said the SAA board of directors in a statement.

As part of the model developed to stabilize the company, business practitioners will be appointed “in the near future” to oversee the process, that was adopted.

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Though there has not been any confirmation from the union as yet, part of the agreement saw a 5.9-percent wage increase backdated to April, but would only start to be paid out next year March depending on funding.

SAA initially said no to any pay increase since it was not making profit. The cash-strapped airline needs two billion rand ($136 million) to see operations through the end of March.

“SAA understand that this decision presents many challenges and uncertainties for its staff. The company will engage in targeted communication and support for all its employee groups at this difficult time,” said the board.

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