May 8, 2020 / 11:10 AM / a month ago

South African court halts layoffs at ailing airline SAA

JOHANNESBURG (Reuters) - South Africa’s Labour Court ordered a halt to layoffs at ailing South African Airways (SAA) on Friday, siding with two trade unions who had argued that the airline’s administrators had acted unfairly.

FILE PHOTO: A South African Airways (SAA) plane is towed at O.R. Tambo International Airport in Johannesburg, South Africa, January 18, 2020. REUTERS/Rogan Ward

The decision throws efforts to rescue SAA into greater disarray after the administrators said the airline had run out of cash and the minister responsible for SAA criticised their efforts to rescue the company.

State-owned SAA has been fighting for its survival since entering a form of bankruptcy protection in December, with its fortunes deteriorating further when the coronavirus pandemic forced it to halt all commercial passenger flights and the government said it would not provide further funding.

The administrators have until the end of the month to draft a rescue plan for SAA but have told creditors that a wind-down or liquidation are likely outcomes.

Public Enterprises Minister Pravin Gordhan said on Wednesday that the government wanted to avoid SAA being liquidated and preferred to see it restructured into a new airline.

The administrators started consultations with unions in March about layoffs, but two unions - the National Union of Metalworkers of South Africa (NUMSA) and the South African Cabin Crew Association (SACCA) - said those consultations should wait until the administrators had presented a business rescue plan.

The Labour Court sided with the unions, ruling that the layoff notices were “procedurally unfair” without the rescue plan having been published and ordering the administrators to withdraw the notices.

Administrators are still permitted to offer voluntary severance packages and employees can accept them, the court said.

The administrators, who had suspended a deadline for staff to agree to layoff terms while the court made its decision, said they were considering their next steps.

NUMSA and SACCA welcomed the judgment and said they were working on their own turnaround plan for SAA.

Gordhan said in a statement that his ministry’s lawyers would study the ruling to assess the implications for rescue efforts.

SAA has not made a profit since 2011 and has received bailouts worth more than 20 billion rand ($1.1 billion) over the past three years, a major drain on public resources alongside struggling state utility Eskom at a time of weak economic growth.

The airline said on Friday that it would continue repatriation flights “during the month of May and beyond” and that it was in talks with officials on places where South Africans might be stranded abroad.

Reporting by Alexander Winning; Editing by David Goodman and Louise Heavens

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