Mango Airlines, the low-cost wing of SAA, is set to cut its employees’ salaries by up 50percent.
Public Enterprises Minister Pravin Gordhan told Parliament during a briefing on the state of state-owned entities including SAA, Eskom and Transnet that Mango’s employees had taken salary cuts voluntarily. Gordhan said the salary cuts would be made beased on pay grades, with the lowest-paid employees taking the smallest cut.
He said that money would be used to help cash-strapped SAA operate beyond the end of May.
“Mango has been a reasonably well-run airline and we are waiting to see what kind of developments there are, both domestically and globally, in respect of low-cost airlines and what their future is,” said Gordhan.
A Mango spokesperson confirmed the salary cuts but said the airline needed to first send an official communique to all employees.
The airline industry has been one of the biggest casualties of the coronavirus (Covid-19) pandemic.
On Friday, Ethiopian Airlines said the continent’s aviation industry would suffer losses of up to $6billion in sales this year due to travel bans.
The airline’s chief executive, Tewolde GebreMariam said the economic cost of the lockdowns to prevent the spread of Covid-19 would be a bigger priority for African governments than supporting airlines. GebreMariam said banks could be reluctant to lend the carriers more money.
The crash of SAA, albeit not Covid-19-related, has had a direct impact on Mango operations.
Intellidex head of capital markets research Peter Attard Montalto said a fire sale of Mango, technical and catering, remained a possibility as the government would try to keep hope for a new state airline alive.
Attard Montalto said South Africa would remain a profitable route for other airlines, with good, inelastic demand by price on legacy carriers from Europe, and so there would be enough capacity after the crisis.
He said there was already excess capacity for Mango domestically. “Bond investors and rating agencies see SAA as a stick with which to beat South Africa,” he said.
“Second, the Department of Public Enterprises (DPE) is increasingly digging a political hole on this issue, making more and more detailed promises to unions and others on the airline which are unlikely to be fulfilled.
“This will ultimately blow back on them – but in particular on the president – and create more risk around him. Does he know DPE are doing this and how crazy this looks? Is he in control or authorising this SAA situation?” The latest report by Société Internationale de Télécom Aeronautiques (SITA) said the pandemic would have a far deeper impact on the way the air transport industry would operate in future than previous shocks such as 9/11. SITA chief executive Barbara Dalibard said it was clear that the impact on aviation by Covid-19 would be long and complex.
“The recovery will also change the way we will travel… this crisis will shape the air transport industry over the next few years.”