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South African Airways Cuts Deal With Unions

The state-owned South African Airways (SAA) managed to reach an agreement with labor unions on Friday the 22nd November 2019, ending a strike that lasted over a week and cost the Airline approximately $3.4 million each day.

Last week, the South African flag carrier announced that the Airline would be undergoing a large-scale restructuring that would involve laying off 944 workers from the company’s bloated 5,000 employee payroll in order to offer a 5.9% pay increase.

Workers’ unions expressed disdain over the expected plans, and the South African Cabin Crew Association (SACCA) and the National Union of Metalworkers of South Africa (NUMSA) called for a strike early this past week.

The unions were seeking an 8% pay increase and no layoffs, but the Airline argued that they could not accommodate such demands. The week-long strike led to a loss of around 3,000 employees, causing cancellations across domestic and international flights and affecting over 40,000 passengers.

Meetings were held throughout the week between Airline officials, union leaders, and the South African government in an attempt to reach a solution that would return the carrier to full operations.

Acting CEO, Zuks Ramasia, reasoned with the unions that the strike would only worsen the financial condition of South African Airways and make it more difficult to reach an agreement that would benefit employees in the long run.

The parties finally came to a resolution on Friday the 22nd November, agreeing to a 5.9% pay increase retroactive to April 2019 and no layoffs.

While resolving the immediate issue and returning the flag carrier to service, the agreement did little to provide clarity for South African Airways’ long-term financial sustainability.

The Airline has been unprofitable for the past seven years, suffering losses of over $370 million this year alone. Since 2012, South African Airways has taken in over $2 billion from the government in order to stay aloft.

However, corruption and poor management on behalf of the government have contributed to much of the struggles facing SAA and several other state-owned corporations.

Public Enterprises Minister Pravin Gordhan explained that while he wishes to keep the Airline operational, the government is in no position to provide financial support.

Financial mismanagement coupled with dwindling demand from South Africans and growing international competition has raised questions regarding South African’s long-term viability.

Officials from both the government and the Airline have begun openly discussing the possibility of selling portions of the company to private investors, including Ethiopian Airlines and Virgin Atlantic.

The company has announced that a task team has been assigned to support the Airline in its cost-cutting mission. CEO Ramasia explained that “the main objective of the Task Team will be to identify and consider cost-saving initiatives, inter alia, insourcing, and contracts. Should the Task Team be able to realize savings, a percentage of the after-tax savings may be ring-fenced and paid to employees in the Bargaining Unit.”

Along with signing the deal to end the labor strikes, South African Airways also announced on Friday that it would be discontinuing its Hong Kong route until December 14th, likely a result of civil unrest in the Chinese region and the airline’s poor financial position.

In other news, the carrier recently received its first of four A350-900s, which Ramasia hopes will “contribute to the airline’s operational efficiency” and “return the airline to financial sustainability, in the shortest time possible.”

The A350 is expected to replace the A340-600 on the airline’s route to New York’s John F. Kennedy Airport (JFK). All four A350s will be on three-year leases to the airline.

While the Airline was able to continue serving a select few destinations during the strike (including, Heathrow, Frankfurt, and Munich), the airline plans to reconvene full international service on Saturday, with domestic service resuming on Monday.  

Source: airwaysmag