South African Airways & Unions Reach (Unrealistic) Agreement

Filed Under: South African Airways

South African Airways employees have been on strike for much of the past week. Management and unions have just reached an agreement, though if you ask me it’s not much of an agreement at all…

South African Airways’ Planned Restructuring

South African Airways has been in a terrible financial situation for years, with seemingly no end in sight to their struggles. Last week the airline announced a radical restructuring, which would see the airline laying off nearly 1,000 of their 5,000+ workers.

As much as job cuts suck, this was most definitely a needed measure, given how inefficient the airline is.

Largely I blame the government of South Africa for these issues, because they’ve very much kept the airline in limbo. They’ve funded them just enough to keep them alive in their current state, but not enough to actually allow them to make any changes. They’re set up to fail.

Why South African Airways Employees Went On Strike

Last week the South African Cabin Crew Association (SACCA) and the National Union of Metalworkers of South Africa (NUMSA) called for industrial action. This seemed to be for two reasons:

  • They wanted a pay increase of up to 8%, while management offered “only” a 5.9% pay increase, subject to the availability of funds from lenders
  • They didn’t want any layoffs

SAA & Unions Come To An Agreement

South African Airways and the unions have come to an agreement that will see the end of strikes:

  • Employees will receive a 5.9% pay increase, retroactive to April 2019 (the retroactive amount will be payable with the April 2020 payroll)
  • There will be no layoffs

The pay increase as such isn’t the big issue here, but to me the serious problem is the lack of layoffs. The company simply isn’t efficient with how many employees it currently has, and no one is being done a favor by keeping around that many people.

While this resolution solves the immediate problem of the airline not being able to operate, it doesn’t do much beyond that, as South African Airways fights day by day to stay alive.

As part of this agreement, management and employees will also establish a “task team” to cut costs, described as follows:

The main objective of the Task team will be to identify and consider cost saving initiatives, inter alia, insourcing and contracts. Should the Task Team be able to realise savings, a percentage of the after-tax savings may be ring-fenced and paid to employees in the Bargaining Unit. The Task Team will discuss and agree on a formula for such payment.

As SAA’s Acting CEO, Zuks Ramasia, describes the deal:

“SAA is equally pleased that the National Transport Movement (NTM) also signed SAA’s wage agreement earlier today.

We are proud of SAA employees’ sacrifices by supporting the airline in these difficult times.

This deal, particularly the fact that we offered a 5.9% salary increase amidst grave financial challenges, is to recognise the company’s employees for the important contributions they make to the overall success of the company, economic development, and inbound and outbound tourism.”

Bottom Line

It’s good to see that strikes at South African Airways are done for now, though this seems to me like an unrealistic deal. We’ll see where the airline gets the money for the retroactive pay in April, not to mention how they’ll turn themselves around without laying off at least part of their workforce.

What do you make of this SAA deal between management and the unions?

  1. Trying to make sense. The Airline is at the verge of going out of business. Revenue / cost ration is below 1 aka profit as negative. They have a Task Team to see how they can save money. Great. Here is the confusing part for me – , Should the Task Team be able to realize savings, a percentage of the after-tax savings may be ring-fenced and paid to employees. – So save money, but give that savings (even if just part of it) to outside of business aka into employees pocket.
    Should it be; — if the Task Team be able to realize savings, and these saving produce profitability, give a percentage of profit to employees?

  2. @Lou
    Given that that flight would be in the past, you should be safe lol.
    For April 2020, I think a domestic flight would be fine. You wouldn’t really be out that much even if they did cancel, but I think they’ll make it to then. I really don’t think they would’ve made this agreement if they knew that they wouldn’t be able to even pay up in April, even if they won’t survive much longer beyond that.

  3. Does SAA really need to be on a path to profitability? South Africa is a relatively wealthy country with among the worst inequality in the world. Around a tenth of employment is in tourism-related industries, so maintaining SAA is arguably important for the economy as a tourism driver. The unions clearly realize they have the upper hand here. You’ve made the comparison to Alitalia before, Ben.

  4. I long for the day when workers can be fired for going on strike. Dismissing an employee for refusing to do their job should be an expected and natural outcome.

  5. @james N, and replace them with who? Train a whole new workforce?
    How long would that take.

    These aren’t some meanigless corporate/sales jobs that anyone can do.

  6. @James N, and CEOs and owners of companies that don’t pay or treat their employees properly should go to jail.

  7. Ah the good old days of child labor and 6 day work weeks.

    This raise has to be looked at in the context of a high inflation environment. Inflation in South Africa a has averages above 5% for most of the past ten years. So a raise of 5.9% doesn’t provide the staff with any more purchasing power. It allows them to keep living where they do and buy the same basket of good.

  8. The point is that, given its operational needs, SAA has many more employees than other airlines with similar numbers of aircraft and routes. If you can’t touch job numbers, then you’d have to expand operations in order to gain more efficiency. But how do you do that profitably, or at least without bleeding so much money? They don’t have a viable business plan, so it’s either big subsidies from the government, or go out of business. It’s too bad – the several times I’ve flown the airline I’ve had positive impressions.

  9. Unions are why the developed world has a weekend, 40-50 hour work weeks, minimum wage, paid leave; in other words, a – if not in many cases the – driving catalyst for most employment and labour law protections in the developed world.

    But yeah, fire ’em all.

    “Well now they’re out of control and not doing any good any more!” = A mighty convenient way of saying you’re happy to benefit from the efforts of organised labour while then turning around and denouncing them.

    More on topic, quite a few armchair experts not just on SAA or the industry in South Africa, but the nation itself.

    Yes, layoffs need to ultimately happen to bring the size of the workforce more in line with competitive industry standards.

    No, a 5.9% is not impressive when inflation is consistently at or above that number and most South Africans in professional jobs receive more than that.

  10. James doesn’t really present any arguments or backing for his claim, although I’m sure he has his reason.

    But his original post is just a sort of vague appeal to some bygone era and a throwaway sentiment about “doing your job”. It’s a pretty sh** argument to actually convince someone about his POV and sort of laughable he calls the responses emotional and straw men.

  11. “James doesn’t really present any arguments or backing for his claim…”

    Newsflash, I didn’t make a “claim”. I basically stated that workers should face the prospect of being fired for not doing their job. Also, there’s nothing “vague” about my point. If you choose to not do your job, your employer should be able to fire you. Is that clear enough for you?

    Finally, the original responses to my post are clearly nothing more than emotional replys and the obvious straw man argument of, “Train a whole new workforce? How long would that take.”

    Where exactly did I suggest every employee be fired? You would be well-served, along with others, if you actually addressed my comment.

  12. You don’t seem to believe Industrial work stoppages. Most people replying here do since the power imbalance between a large corporation and a single employee is immense and a lot of societal benefits we all enjoy in the western world (and South Africa is quasi-western) have been achieved that way. This is not simply employees refusing to “do their job” or come to work. I’ve spent several years working in countries in East and Southern Africa and have done a lot of work for my employer with terminating staff members.

    Virtually all of the labor statutes in these countries allow terminations for individuals who refuse to their job. You’re conflating an industrial action with just not showing up is disingenuous or just don’t believe in the value of industrial actions, which I guess is like your opinion man, but one I don’t think is particularly admirable or really a societal benefit.

  13. ” You’re conflating an industrial action with just not showing up is disingenuous…”

    I’m not conflating anything and whether it’s an “industrial action” or simply not “showing up” the result is the same. The employee is refusing to do their job and should suffer the consequences.

    What’s disingenuous is you suggesting that changing the label of a particular act, not doing your job, someone changes the situation.

  14. JamesN: “I long for the day when workers can be fired for going on strike.”

    That was your original comment. This strike was legal, as in, authorised by South African labour laws. So either you don’t believe in those laws, or you misunderstand the difference between a legal and illegal strike. I’ll assume you do understand the difference, so that means it’s the former. Thus my original reply stands: you appear to be someone who is happy to eat the fruits of industrialised labour action while at the same time criticising the actions of industrialised labour that don’t benefit you.

    It’s this innate human selfishness that reminds us why industrialised labour exists in the first place.

    Happy Monday mate – hope you enjoyed your weekend; you can thank unions for it.

  15. “This strike was legal,…”

    Irrelevant and does nothing to change my point. What’s so difficult about understanding that a worker isn’t doing their job?

    “…you appear to be someone who is happy to eat the fruits of industrialised labour action…”

    This is a myth promulgated by those who support unions and the governments that empower them. The bulk of the monetary and benefit gains that have occurred over the past decades are unrelated to actions from unions. . In fact, there’s substantial evidence to suggest that unions have actually retarded growth.

    “…hope you enjoyed your weekend; you can thank unions for it.”

    A statement so nonsensical, one has to wonder if it was typed with a straight face.

  16. @james N
    do you also support private civil and criminal liability for shareholders and leader at corporations?

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