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Sout ican says Funan Resoures 65 Fla, Bock ays Pat SOUTH AFRICAN AIRWAYS GF ants tensonal pot Rua Sasha Tot 27 19732805 Erol: GUER@Mrseacon 11 November 2019 NOTICE OF CONSULTATION IN TERMS OF SECTIONS 189 AND 189A OF THE LABOUR RELATIONS ACT, 1995 SOUTH AFRICAN AIRWAYS 1.1. South African Airways is one of Africa's leading airlines with long standing international recognition, servicing @ wide reaching international, regional and domestic route network. ‘SAA’s Vision is to be “Africa's leading world-class airline”, with a mandate to deliver commercially sustainable world-class air passenger and aviation services in SA, the African continent and to our tourism and trading partners. 1.2. SAA pursues this mandate through an integrated corporate structure, with dua-branded airline operations comprising the SAA passenger airline and Mango, the low-cost carrier. SAA's operations are supported by Voyager, Africa's leading airline loyalty programme, ‘and SAA Cargo, both operating as divisions within SAA. 1.3. SAA has three subsidiaries: Mango, SAA Technical, and Air Chefs. 1.4. SAA's primary goal is to transform into a financially sustainable airline, with a renewed focus on driving customer centricity, commercialising the Airline, route network profitability, strengthening Commercial and Aviation skills and a series of strategic initiatives that will refocus the organisation in driving a profit and loss (P & L) ethos with a strong focus on cost management (revenue and cost). 2. OPERATIONAL REQUIREMENTS 2.1.SAA is contemplating reorganising and restructuring based on its operational requirements. The operational requirements relate to SAA's financial and organisational needs. SAA needs to address its loss-making position, as it is not competitive in the marketplace and has a high cost base relative to its revenue generation. 2.2, SAA urgently needs to address the sustained loss-making position that has subsisted over the past years. 2.3. Accordingly, SAA is currently contemplating undergoing a reorganising and restructuring process that seeks to address the present prevailing operational challenges. The scope of the contemplated organi tional structural reorganisation encompasses SAA in its entirety, all departments and divisions, excluding subsidiaries, such as SAAT, Mango and Air Chefs. 2.4, The information set out below seeks to provide clarity and context on the envisaged organisational restructuring. This information is also intended to ensure that engagements with recognised Labour and Employees are meaningful 3. CHALLENGES FACING SAA SAA has faced numerous challenges over several years, culminating in the current grave situation. 3.1. Funding and liquidity challenges — SAA cannot borrow indefinitely and needs to repay debt; 3.2. High interest costs on loans; 3.3. Volatile, fluctuating fuel price; 3.4. Volatile currency — particularly Rand against the US Dollar, 3.5. Cash generation is insufficient to cover SA's fixed cost base; 3.6. Operational inefficiencies and other issues; 3.7. Structure is not ft for purpose 3.8. Intemational & regional competition; 3.9. Supply chain inefficiencies; 3.10. Revenue stimulation and network optimisation challenges: 3.11. Ageing Fleet; 3.12. The trend in SAA’s operations since 2015 has been negative: APR 2015 APR 2019 VARIANCE FLIGHTS 4535 3027 = 1508 SEATS 738 804 494 992 ~ 243 812 ASKS (m) 2.349 409 1758 059 - 591 350 3.13. We are also facing severe competition in all the markets we serve: Domestic flights originating in JNB (ORT) for Jan - Jul 2019 Change Est. Pax_[Avrg fare| Pax| Fare SAA (incl, SAX & Airlink)| 1572974 1514820 $134] -4%[-19%) Total Market 5 425 299 5 831760 $85] 7% Regional flights originating in JNB (ORT) SAA (incl. SAX & Airlink)[ 1353905] _$249[ 1346 201 $215 Total Market 2831800] $233] 2779854 $214] Airline International flights originating in JNB (0) South African Airways [| 669099 $605] 632295 Total Market 3055 019) $578| 3138448 3.14, In recent years the SAA Group has experienced management turbulence, a dearth of skills in key positions, deteriorating results and increasing debt levels. |. HEADCOUNT RATIONALISATION 4.1. As at 1 November 2019, SAA (excluding subsidiaries) has a total workforce of 5 149 (globally). 4.2. At this moment, it is difficult to estimate the number of Employees who may eventually be retrenched as result of the proposed restructuring and efficiency measures as this is subject to the outcome of the consultation process and other avoidance measures. 5. 4.3. With the above in mind, it is estimated that it is possible that around 944 Employees may be affected. 4.4. No final decisions have yet been taken, nor will any final decisions be taken until we have consulted. 4.5. SAA has not retrenched any Employees for operational requirements in the preceding 12 months, CONSULTATION PROCESS 5.1. SAA proposes the appointment of an external objective Facilitator, jointly agreed between the parties, to facilitate the consultations in accordance with section 189 A (4). 5.2. SAA has proposed the following three private facilitators- * Ebrahim Patelia ‘* Advocate Kenny Mosime * Ahmed Cachalia 5.3. If the parties are unable to agree on the names within a period of 3 days from receipt of this letter, SAA will approach the CCMA to appoint a facilitator in accordance with the provisions of the LRA. 5.4. During the consultation process, SAA will engage in a meaningful joint consensus — seeking exercise to reach consensus with the recognised Unions and affected Employees on appropriate measures to: + Avoid retrenchments; ‘+ Minimise the number of retrenchments; ‘+ The timing of the retrenchments; * Mitigate the adverse effects of the retrenchments; + The method for selecting the Employees to be retrenched; * The severance pay for Employees that may be retrenched; + The affected job categories / positions. 4 5.5. Consultation Principles © We will consult in good faith; + We will treat all Employees with dignity and respect; + We will comply with legislation; + We will comply with SAA’s policies, ethics and values; ‘+ We will communicate with all Employees regularly; ‘+ We will consult and communicate openly and transparently, ‘+ We expect active engagement and participation from our Employees 5.6. Who Will We Consult With? We will consult with the recognised Unions in SAA for Employees and Management, i.e.: « NTM ‘| NTM Management Forum * SACCA * NUMSA No Lawyers, Labour Consultants, Advocates or any third party will be allowed to pat ipate in the consultations. Consultations will be held in accordance with the LRA and the Codes of Good Practice issued pursuant to it. DISCLOSURE OF INFORMATION ‘SAA will share all relevant information in relation to any potential retrenchment of Employees in an endeavour to ensure that the consultation process is as effective as possible. This information will also facilitate engagement with Management in a meaningful, joint consensus seeking process. ‘Should any confidential information be requested, such information, provided it is relevant, will be made available to 2 representatives of the consulting parties provided they sign a non- disclosure agreement. 7. ALTERNATIVE OPTIONS THAT THE EMPLOYER CONSIDERED. The following alternative options were considered by SAA: 7.1, Freezing the filling of vacancies other than pre-approved business critical positions. 7.2. Potential consolidation of management structures. 7.3, Reducing the number of fixed term Employees 7.4, Implementation of the Accelerated Long-Term Turnaround Strategy. 7.5. Implementation of cost containment initiatives including: 7.5.1. Change of scope in certain procurement contracts. 7.5.2. Early termination of certain procurement contracts. ‘The above does not assist SAA in achieving all ofits required operational efficiencies. 8. OPTIONS CONSIDERED BUT FOUND NOT TO BE VIABLE. The following options are not considered as alternatives as they do not meet the operational requirements of the business. 8.1, Reduction of Benefits 8.2. Job Sharing/ splitting These options would lead to significant further demoralisation of Employees causing possible reduction of producti ly levels. In addition, the loss of talent to other organisations and competitors may increase The above options will not realise a sustainable reduction in labour costs. 9, SELECTION CRITERIA If dismissals for operational reasons during the consultation prove to be unavoidable, all affected employees will be regarded as " displaced”. SAA proposes the selection scenarios and criteria set out below in populating the new structure. A copy of the old and new structures will be made available in due course. 9.1, Selection Criteria Best competency fit: Best competency fit can be defined as follows: ‘+ Employees who demonstrate the best fit to the competencies required to deliver the outputs/outcomes of the job. The definition includes criteria such as knowledge, skills and attitude. © Relevant experience; © Applied skills & knowledge (Technical); and © Applied skills & knowledge (Management & Leadership); © Employment Equity only after all the criteria has been met and a decision is required between two equally competent individuals. * Weighting requirements for the above criteria: © Qualification 20% © Applied skill and knowledge 50% © Experience 30% * Psychometric assessments may be applied where required 10. THE TIME WHEN, OR THE PERIOD DURING WHICH THE DISMISSALS ARE LIKELY TO TAKE EFFECT The timing of when the contemplated dismissals will take effect is envisaged to be as follows: 10.1. The initial consultation meeting will be held on 12 November 2019. 10.2. Employees whose employment is terminated will be provided with notice pay in line with their contract of employment. Retrenchment for affected redundant Employees is therefore likely to take effect on the 31 March 2019. 10.3. Implementation Timeline: cP . _.l Sees soe onan ne FAG ‘ores fo 2 Seosion Pane eppcited 2 Thy wepcedinte 2 Enon 31 Mor2t20 aa Sermo Rear pena telecasts Series Fy eS 11. PROPOSED SEVERANCE PAY ‘SAA proposes 1 week of remuneration for every completed year of service in accordance with the Labour Relations Act. All payments will be made subject to the tax laws of South Africa. 12. THE ASSISTANCE THAT THE EMPLOYER PROPOSES TO OFFER TO THE EMPLOYEES LIKELY TO BE DISMISSED 12.1. Inform and establish relations with Recruitment Agencies where CVs can be sent to on behalf of redundant Employees; 12.2. Assistance to redundant Employees to compile CVs; 12.3. Paid time off will be granted to redundant Employees to attend interviews; 12.4. Completion of pension/provident fund documentation; 12.5. Emotional assistance by a Trauma Counsellor (Psychologist); and 12.6. FinanciaVinvestment advice. 13. THE POSSIBILITY OF RE-EMPLOYMENT: 13.1. Subject to the availability of vacancies in future, SAA will give preference to retrenched Employees for a period of up to 12 months following the retrenchments, 13.2. Retrenched Employees will be recruited in accordance with SAA’s recruitment and selection process. 13.3. Retrenched Employees have the responsibility to ensure that they contact SAA to ascertain whether there are available vacancies. 14. THE REASONS FOR THE PROPOSED MEASURES The reasons for the proposed retrenchments are based on SAA's economic and structural needs as discussed above. 15. REPRESENTATION DURING THE CONSULTATION PROCESS 15.1. Should recognised Labour require any information which has not been disclosed above, he/she is requested to inform the Head of Department: Employee Relations in writing, 15.2. In addition, Employees are invited to make representations about any matter dealt with above as well as any other matter relating to the contemplated retrenchments. Please submit all representations in writing to the following email address: futureflight@flysaa.com. Employees may pose any questions which SAA will respond to within a period of 5 working days after receiving the question. 15.3. SAA will, in good faith, keep an open mind throughout the consultation process and seriously consider any proposals put forward by Employees. 18.4. During the consultation process SAA will be represented by the Head of Department: Employee Relations, Lourens Erasmus and/or his appointed delegatels. Yours faithfully “il wert Kan > Acting General Manager: Human Resources

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