In a move supported by several unions, regional airline Airlink has filed a court application today to prevent administrators from discussing a rescue package for national carrier South African Airways (SAA). The national carrier has been in a form of bankruptcy protection since December 2019 and has received several loans to keep it afloat.
Airlink is working with unions to block another rescue attempt. The government in South Africa will try to prevent the court motion to allow the rescue meeting to happen on Thursday of this week as planned.
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Past problems compacted by COVID-19
It’s no secret that South African Airways has been in trouble for a while. The airline hasn’t posted a profit since 2011 and entered into a form of bankruptcy protection last year. The government in South Africa has already provided over 20 billion rand ($1.1 billion) of funding over the past three years.
Problems have been compounded during recent months due to the impact of COVID-19 on the aviation industry. SAA grounded its fleet in March. A team of administrators is due to meet on Thursday to discuss the next stages of a bailout plan, which would involve laying off 90% of the airline’s current staff at the cost of 10 billion rand ($575 million).
The new legal battle
However, regional airline Airlink and several unions have decided that enough money has been poured into the airline. Airlink and the unions, including the National Union of Metalworkers of South Africa (NUMSA) and the South African Airways Cabin Crew Association (SACCA), have moved the block the Thursday meeting. Separately, they have also applied to have the airline placed into liquidation, saying that the rescue plan will not work.
Many have been vocally critical of how much money the government has been willing to pour into the airline to try to save it. The Department of Public Enterprises (DPE) is continuing to try to save the airline. It confirmed today that as a majority shareholder, it would move to block the legal action and to allow the meeting to take place. In a statement, the DPE said,
“As we approach the final week to either endorse or reject the business rescue plan it is disturbing that a competitor of SAA, which is 100% privately-owned, as well as two labor unions, who should be acting in the best interest of their members, are seeking to destroy SAA by forcing a liquidation through the courts”.
A strategic alliance
Airlink is, in fact, a creditor of SAA. A new business plan could compromise its payments so it would much rather see the airline’s assets liquidated and used to pay off debts. The airline has worked with several large unions in South Africa who are also taking similar legal action. The unions are unhappy with the proposed rescue package and reject plans to lay off the majority of staff.
The hearing for the legal action is due to take place on June 24th. This is just one day before the airline’s administrators will meet to vote for the rescue package making this a crucial few days for the airline. If the government does get its way, it may face the consequences from some very unhappy unions.
Let us know your thoughts on the situation in South Africa in the comment section. Do you think Airlink and the unions are right to block the rescue package?