South African Airways Rescue Hits Snag as Union Demands More Say

(Bloomberg) -- Efforts to save South African Airways by placing it into bankruptcy protection have hit a snag, with labor unions demanding more say over who will administer the carrier.

The government announced Wednesday that SAA would be put into voluntary business rescue and be given 4 billion rand ($273 million) in loans and debt guarantees to keep it afloat, while an independent manager tries to turn it around. That process has begun and the Companies & Intellectual Property Commission has named Les Matuson of Matuson & Associates as SAA's administrator, the airline said in a statement on Friday.

The National Union of Metalworkers of South Africa and the South African Cabin Crew Association, which represent about 3,000 SAA workers, said that while they supported the process, it had been rushed. There had been inadequate consultation and the company's board was still managing it from behind the scenes, the unions said.

“We want another business practitioner who is going to work with the one who has already been appointed” with the support of the unions, said Numsa spokeswoman Phakamile Hlubi-Majola. “We don't think think there is anything wrong with having two business-rescue practitioners. This is the first time we have ever had a state-owned enterprise undergoing this process and we need to make sure that it is done right.”

South Africa's Companies Act enables firms in financial distress to file for business rescue. If granted, an administrator is appointed to help the company reorganize and assess whether it can be turned around. Companies in the process of being rehabilitated are protected from liquidation and legal proceedings, enabling them to keep trading. The law allows for the appointment of more than one administrator.

SAA hasn't made a profit since 2011 and a series of efforts to turn it around have failed, leaving it reliant on state bailouts to remain solvent. The government's own finances are already stretched and it is facing demands from other state companies for funding, limiting its scope to provide the airline with more aid.

To contact the reporter on this story: Mike Cohen in Cape Town at mcohen21@bloomberg.net

To contact the editors responsible for this story: Paul Richardson at pmrichardson@bloomberg.net, Hilton Shone

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