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South African Airways, the beleaguered state-owned airline that’s reliant on government financial support to continue operating, has started a restructuring process that could see its workforce cut by almost a fifth.
As required by South African law, the carrier has started talks with labor unions about its plans, which could affect 944 of its 5,149 employees, South African Airways said in an emailed statement. The proposed restructuring includes all South African Airways divisions and departments, excluding its Mango Airlines, Air Chefs, and South African Airways Technical units, it said.
The airline is one of several state-owned companies, including power utility Eskom Holdings SOC Ltd., the South African Broadcasting Corp. and state arms manufacturer Denel SOC Ltd. that are fighting poor finances after years of mismanagement and alleged corruption.
South African Airways has incurred more than 28 billion rand ($1.9 billion) in cumulative losses over the last 13 years and missed the deadline to submit its earnings for the financial year ending March. While it recently received a 5.5 billion-rand lifeline to extend maturities on outstanding debt, it hasn’t been able to reach an affordable repayment plan with creditors.
“We urgently need to address the ongoing loss-making position that has subsisted over the past years,” acting Chief Executive Officer Zuks Ramasia said in Monday’s statement. “That is why we are undergoing a restructuring process that seeks to ensure effective implementation of the accelerated long-term turnaround strategy amidst the present prevailing operational challenges.”
In his medium-term budget policy statement last month, Finance Minister Tito Mboweni said the government will repay South African Airways’ outstanding government-guaranteed debt of 9.2 billion rand ($629 million) over the next three years.
The government has also said it’s talking with potential investors in the airline to ease the continuing burden the company puts on the national budget. Identifying an equity partner has been proposed in the past, though no buyer has officially come forward. Ethiopian Airlines Group Chief Executive Officer Tewolde Gebre Mariam last month said his airline would consider taking a stake if a request was made.
©2019 Bloomberg L.P.