South African Airways (SAA) inches closer to collapsing as the Covid-induced crisis forces the already troubled carrier to lay off its entire workforce after failing to gain further government financial aid.
The state-owned, Star Alliance carrier has offered severance deals to all 4,700 staff from the end of this month, according to Bloomberg. The carrier operates 37 all-Airbus passenger aircraft and two B737-300 freighters.
South Africa already invested more than USD 1.1 billion to help keep South African Airways aloft, but additional aid for the 86-year old state-owned carrier was turned down.
SAA was placed in bankruptcy protection in December before entering into business rescue arrangements in late-January, which included a preliminary funding agreement with the South African government and the country’s banking sector. But the sudden global pandemic rapidly exacerbated the carrier’s financial woes.
As a result administrators concluded that a successful turnaround is now unlikely as a result of the global pandemic, according to a proposal to eight labour groups seen by Bloomberg News.
SAA has been flying cargo and operating chartered flights to countries such as Germany and Brazil in recent weeks, but no commercial passenger services.
The basic value of compensation will be one-week pay for each year of service and will depend on the successful disposal of assets such as real estate, according to the document. The airline is planning to sell all remaining assets including two prized night time slots at London Heathrow Airport (LHR).
SAA is but one of a number of state-owned companies that have become technically insolvent without financial assistance from the South African government. These follow years of mismanagement and corruption scandals – particularly under the presidency of Jacob Zuma, which ended in 2018.
The airline itself has had at least nine chief executive officers in the past decade, hampering attempts at a turnaround, while responsibility for the carrier was passed from the Department of Public Enterprises to the National Treasury and back again.