LDN - Business

South African Airways running out of cash as unions seek to expand strike

[November 20, 2019] By Alexander Winning and Emma Rumney

JOHANNESBURG (Reuters) - South African Airways (SAA) is running out of cash and could be liquidated if the government doesn't give it additional guarantees soon, a board member said on Wednesday, as trade unions threatened to escalate a crippling strike.

State-owned SAA has racked up losses of more than 28 billion rand ($1.9 billion) over the past 13 years and wants to cut jobs as part of a turnaround plan.

The National Union of Metalworkers of South Africa (NUMSA) and South African Cabin Crew Association (SACCA) called a strike at SAA last week after wage talks turned acrimonious and the airline said it planned to cut almost 20% of its staff.

On Wednesday the unions threatened to follow through with a plan to shut down South Africa's entire aviation sector via a secondary strike.

SAA board member Martin Kingston told Reuters the strike was costing the airline around 50 million rand a day and that banks weren't willing to lend the company more money without the government approving more state guarantees.

"We may not have enough cash to pay salaries at the end of the month, we are still investigating how we can do that," he said. "This is a real-time discussion we are having with National Treasury and the Department of Public Enterprises. We need help imminently."

The financial crisis at SAA is a key test of President Cyril Ramaphosa's pledge to fix bloated state firms. He needs to balance the need for cost-cutting and job cuts with deep-seated anger at the country's 29% unemployment rate and the weak state of the economy.

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Workers of South African Airways (SAA) hold placards during a strike over wages and job cuts at SAA headquarters in Kempton Park, South Africa, November 15, 2019. REUTERS/Siyabonga Sishi/File Photo

A broad cross-section of society also vocally opposes any moves that could weaken the role of state firms.

SAA's last permanent Chief Executive Vuyani Jarana resigned in June after less than two years in the job, saying his turnaround strategy was being undermined by a lack of state funding and too much bureaucracy.

The striking unions held talks with the government and SAA on Tuesday, which ended without any agreement.

NUMSA spokeswoman Phakamile Hlubi-Majola said there would be "no surrender". The union had issued aviation catering firm Air Chefs with a letter of intent for a secondary strike and had secured a strike certificate for a separate issue at British Airways franchise partner Comair <COMJ.J>, she said.

Public Enterprises Minister Pravin Gordhan said in a statement on Tuesday he was committed to saving SAA but the government was not able to offer more financial help.

Over the last three years, the government has given more than 20 billion rand of bailouts to SAA to keep it afloat.

Ramaphosa needs to halt a steep run-up in government debt if he is to preserve the country's last investment-grade credit rating from Moody's, which has a negative outlook.

(Additional reporting by Olivia Kumwenda-Mtambo; Editing by Dale Hudson and Elaine Hardcastle)

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