South Africa’s business rescue practitioners have agreed not to consider liquidating the ailing state-owned airline and suspend consultations about the structured wind down proposal that includes culling the entire workforce, government said on Saturday.

The department of public enterprise said the decision was based on a briefing to the practitioners, Les Matuson and Siviwe Dongwana, on the work being done by what it referred to as “leadership consultative forum” chaired by public enterprise minister Pravin Gordhan and involves representatives of unions at the airline as well as non-unionised members.

The parties agreed to work towards a “national asset which is internationally competitive, viable, sustainable and profitable”.

It wasn’t clear how this could be achieved with the global aviation industry grounded and previously successful operators such as Virgin Atlantic facing collapse and seeking national governments’ aid. Moody’s Investors Service said in a report on Friday night that the government’s fiscal position has reduced the space for providing further support to state-owned enterprises.

The practitioners, who have proposed a winding down process that involves retrenching all employees, said earlier this week that they had two choices: either carry on and implement that plan or throw in the towel and apply for liquidation.

The practitioners on Thursday said the wind-down process would entail the termination of employment by agreement, with severance packages also being agreed. A sales process would be undertaken, which would result in a distribution of the proceeds to affected parties entitled to the proceeds.

This is dependent on employees accepting the termination of their employment by mutual consent. An agreement had to be reached by Friday.

This came after government told employees on Tuesday it wanted to work together to establish “a new financially viable airline”, despite the business rescue practitioners, who were appointed in December, having set in motion the structured winding down.

A wind-down would give employees a better say on termination pay than a liquidation, but for this to happen employees must provide their consent, which they have not done so far. The company does not have funds to pay salaries beyond April and the government has refused to give it more cash.

Unions rejected the proposal put forward by the practitioners. SAA’s two biggest unions the National Union of Metalworkers of SA (Numsa) and the SA Cabin Crew Association (Sacca) on Friday said they would go to court to stop the business rescue practitioners and instructed their members not to sign retrenchment agreements.

The consultations with unions about the proposal of a wholesale retrenchment of staff with packages has now been suspended until next week Friday. It wasn’t clear what would be achieved by next Friday, and whether failure to come up with a workable alternative would mean they would have to accept the existing plan — and the job cuts.

The department said the parties agreed in principle to a leadership compact which commits the government and unions to a “new shared vision, strategic objectives, structures and processes for meaningful engagement, strategic equity partners including employees and other elements aimed at building new, fundamentally different co-operative relationships based on a spirit of strategic partnerships”.

“The leadership recognise the enormity of the challenge but are unequivocally committed to saving SAA and shining the torch to a new world post Covid-19 in which SAA is a key catalyst for investment and job creation.” (Business Day SA)

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