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Decline In Revenue -Passenger Compel Airlines To Cut Jobs

November 10, 2020 Financial No Comments

The decline in revenue-passenger kilometre, high cash burn rate compels airlines to cut jobs, Following the news that Cathay Pacific Airways is cutting over 5,000 jobs in Hong Kong and closing Cathay Dragon brand.

Cathay Pacific joins a growing list of airlines, which have been cutting jobs or plan to do so. Recently, Singapore Airlines and Qantas Airways reduced their workforce by 20% and 30%, respectively. Airlines across the globe are going through the most severe crisis that they have ever encountered. Compared to the impact of SARS on the aviation industry, the monetary impact of COVID-19 is expected to be 45-50 times higher.

Several countries have extended support and even Cathay Pacific received a bailout package a few months back. However, with more than 65% year-on-year decline in global revenue-passenger kilometre (RPK) in YTD 2020, high cash burn, and with the recovery still quite a distance away, airlines do not have many options left.

Malaysia Airlines, the national carrier of Malaysia which is battling to survive,  has offered employees early retirement as the company continues negotiations with creditors and lessors.
The group has warned leasing companies that it is unlikely to be able to make payments owed after November and that state fund Khazanah Nasional will stop funding, forcing it into a winding down process if restructuring talks with lessors are unsuccessful.

Since the beginning of the pandemic, several countries have imposed a ban on flights and travel to arrest the spread of the virus. Though it is a necessary step, it has decimated the airline industry.

While the severity of the pandemic has reduced and flights have resumed in many parts of the world, they have not helped in putting enough bums on seats. International travel has reduced by 85-90%. Safety and hygiene concerns as well as the economic impact of the pandemic, especially job losses, have severely impacted consumer sentiments.

In the absence of sufficient incoming cash and funds, airlines are compelled to resort to unpleasant actions to decrease the cash burn rate. While the majority of the airlines have announced reductions in operations, routes, flights, and seats, they have not found a way to avoid staff adjustments.

Airlines are cutting jobs, and laying off thousands of employees, and syncing existing remuneration contracts with the present environment and productivity to try and keep their heads above water. The crisis has endangered around 45-46 million jobs in aviation and related sectors across the globe.

I watched the Project on Channel 10 last night where they showed the Qantas A380 pilots that have been stood down by Qantas due to the pandemic effects. There were Captains and First Officers that before the pandemic flew the largest passenger airplane and these guys now are driving city buses and keeping a positive attitude and their chin up. Don’t give up guy’s it will come back!

Written by: Joe Cusmano





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