South African Airways is preparing to lay off its entire
employee base after failing to secure additional funding from the government as
part of its rescue plan, according to reports.
The 86-year-old airline has offered severance packages to
all 4,700 staff from the end of this month, according to a proposal to eight
labour groups seen by Bloomberg News. The move was made after the state-owned
carrier’s administrators determined a successful turnaround is now unlikely.
Bloomberg said the basic proposal offers employees one
week’s pay for each year of service and will depend on the successful disposal
of the airline’s assets, including real estate.
The South African Department of Public Enterprises said no
agreements had been concluded, adding: “There are discussions with the unions
on alternatives to the current South African Airways business model, the
success of the business rescue process and the best possible outcome for the
airline’s employees.”
South African Airways has been in business rescue, a form of
bankruptcy protection, since December 2019 after suffering financially for
years. It last turned a profit in 2011 and has in recent years depended on
bailouts and government-backed debt agreements. As part of its restructuring
plan, the carrier began cancelling a number of routes or consolidating domestic
operations with its low-cost counterpart Mango in January and February.
The airline has been particularly affected by the
government’s coronavirus lockdown measures, ceasing all commercial operations
and effectively shutting the company down aside from a handful of chartered
repatriation flights to and from South Africa.
South Africa’s public enterprises minister Pravin Gordhan
has said the government cannot extend further cash agreements due to the
Covid-19 pandemic, while finance minister Tito Mboweni reportedly said SAA’s
closure could help improve state finances.
Airlines around the globe are suffering from travel
restrictions and a downturn in passenger demand, with IATA recently estimating
the industry could lose US$314 billion in 2020 as a result of the coronavirus
crisis.