The week-long strike appears almost over at South African Airways, though the damage has already been done and the beleaguered carrier finds itself in a very dangerous position.
Dangerous position is relative term. South African Airways (SAA) has been in a dangerous position for many years, after reporting losses for seven consecutive years.
And while the deal with workers could have been worse, SAA is now on the hook for a 5.9% pay raise retroactive to last April. Meanwhile, the carrier told employees it does not have the cash to pay full salaries for November.
Why not just promise workers the Brooklyn Bridge too?
The South African Cabin Crew Association and the National Union of Metalworkers of South Africa had sought a 6.5% pay raise with no job cuts. SAA countered at 5.9% pay raise and a cut of 944 jobs, viewed as a critical measure to get the airline on the right track.
The unions won: the agreed-upon deal includes no job cuts. And with a retroactive pay increase promised in a lump sum next March, South African Airways is really going to have a difficult time convincing investors to hop onboard.
The strike, which began on November 15th, costs SAA about $3.4MN per day. Yesterday, SAA suspended service to Hong Kong, citing a desire focus on resuming regional flights.
What Will South African Government Do?
Throughout this process, the South African government has made clear that it will not cave into union demands. That is exactly, however, what South African Airways appears to have done. But without cash and totally reliant upon government support, does it really matter that the airline and unions have struck a deal?
Inflation runs 4-5% per year, so it’s not like a pay increase is unreasonable…if the carrier was not fighting for survival. Every time I write about South African Airways I feel like I am writing about arguments over deck chair upholstery while the Titanic is sinking.
Selfishly, I’d love to see SAA hold out on March, when I have a flight scheduled. More broadly, I’d love to see SAA emerge as a lean and profitable carrier. But I don’t see how this “deal” does not make the situation worse. Mark this as a developing story.