Airlines on brink of collapse
Many of the world’s airlines could be bankrupt by May because of the COVID-19 cisis. WOLE SHADARE writes that air travel has been one of the hardest-hit industries
Changing narrative
The coronavirus has changed the job market almost overnight. The global outbreak has seriously impacted the economy and job security. It will have long-lasting, game-changing ramifications.
Governments have ordered people to remain indoors and self-quarantine to stop the spread of the coronavirus. Companies have asked their employees to work from home. Large gatherings of people are not permissible. Due to restrictions and fear, people are not traveling, taking airplanes, dining out, staying at hotels or attending concerts and sporting events. These current trends will continue even after outbreak is defeated.
This impact would depend on how long the epidemic lasts and could still be exacerbated by recent restrictive measures, such as those taken by the U.S. administration on travel to Europe.
Around 850,000 people travel each month from Europe to the United States, equivalent to a $3.4 billion monthly contribution to the U.S. economy.
Of the 50 million jobs that could be lost, around 30 million would be in Asia, seven million in Europe, five million in the Americas and the rest in other continents.
Counting losses
British Airways is to ground flights ‘like never before’ and lay off staff in response to the coronavirus.
The carrier is to suspend more than 30,000 staff, from cabin crew to ground staff, engineers and head office employees, until the end of May under the government furlough scheme for companies hit by the coronavirus pandemic.
Meanwhile Heathrow has announced it will shut down one of its two runways from Monday due to the reduction in flights.
In a memo to staff titled “The Survival of British Airways”, BA Chief Executive Officer, Alex Cruz warned that job cuts could be “short term, perhaps long term”.
The airline industry was facing a “crisis of global proportions” that was worse than that caused by the SARS virus or 9/11.
Meanwhile, Ryanair told staff they may be forced to take leave from Monday.
An internal memo to Ryanair staff, said crew may be allocated to take unpaid leave due to cancelled flights and schedule changes.
Cruz said: “We can no longer sustain our current level of employment and jobs would be lost – perhaps for a short term, perhaps longer term.”
Air Canada’s loss
Air Canada said it would will temporarily lay off 16,500 employees starting this week as the airline struggles with fallout from the COVID-19 pandemic.
Effective last week Friday, the layoffs of 15,200 unionized workers and 1,300 managers will last through April and May amid drastically reduced flight capacity from the Montreal-based airline.
“To furlough such a large proportion of our employees is an extremely painful decision but one we are required to take given our dramatically smaller operations for the next while,” chief executive Calin Rovinescu said in a statement.
The carrier has halted most of its international and U.S. routes in response to the global shutdown.
The impact was felt harder by the airlines as the United States’ (U.S.) 30 days ban on all European carriers takes effect.
Virgin, others follow suit
The Founder of Virgin Group, Richard Branson, at the weekend turned to the British Government to seek £7.5 billion in credit facilities for the airline industry. This is to shore-up its and other companies finances, as the fall-out from covid-19 starts to bite.
Air France-KLM airlines also took more strategic measures, drawing a revolving credit facility for a total amount of €1.1 billion and €665 million.
India’s aviation and tourism industries are seeking help from the government to mitigate the financial impact of the pandemic.
Nigerian carriers groan
In Nigeria, many airline workers have been asked to go on compulsory holiday for two weeks without pay, while others are proposing pay cut to their workers for as long as they keep their aircraft on ground.
Virtually all airlines around the globe have long stopped operations nearly two weeks ago over 70 per cent cut in capacity. They eventually shut down operations following closure of boarders and airspace restrictions by governments around the globe.
Nigerian carriers ate the humble pie just last week when all of them unanimously called for grounding of their operations and resorted to doing ‘humanitarian’ services which are far and in-between.
Many of the carriers paid percentage cuts to their workers ranging from 50 to 70 per cent of their salaries.
It is however feared that many of them are not expected to paid salaries and allowances this because the airlines which were already struggling before now cannot just pay their workers.
One of the workers who is a cabin crew with a leading domestic airline who spoke to our correspondent said, “We were lucky to be paid by our employers. We got 70 per cent of our salaries. Some airlines paid as low as 50 per cent of workers’ salaries”.
“The new month will most likely prove tough because it does not appear that the problem will end so soon. Airlines are grounded. Aviation is totally grounded. We need government intervention”.
It is very uncertain how airlines are going to react to the situation going by the fact that they will need to take their aircraft for periodic maintenance whether they fly or not. Some maintenance are for six months while others are longer depending on the type of maintenance the airplanes are scheduled to undergo.
Aircraft maintenance is divided into two sections called “Scheduled Maintenance” and “Unscheduled Maintenance”. Standard scheduled maintenance is further divided into three types of checks called ‘A Checks’, ‘C Checks’ and ‘D Checks’. (The B Check got absorbed into the others for more modern aircraft.)
Impact on Lufthansa
Lufthansa in a letter sent to its employees and sighted by Woleshadarenews stated that the pandemic has had massive impact on the carrier with over 95 per cent of its commercial aircraft now grounded and only mainly cargo aircraft to maintain the supply chains for goods and services now flying.
The airline disclosed that from April, 2020, “100 per cent of Lufthansa’s commercial aircraft will be grounded until September. Major cost cutting has already started within Lufthansa to mitigate the significant revenues Earnings Before Interest and Taxes (EBIT) lost and safeguard its cash flow.
“It has already been accepted that it’s 2020 targets will not be achieved and it is not possible to assess what the final damage the impact of the COVID-19 virus will be due to the uncertainty as to know how long the current restrictions need to go on for but for the moment, Lufthansa does not expect any major change until end of September”.
From October, they will slowly ramp up flights again to 25 per cent and at best at 75 per cent capacity by December.
Last line
Within weeks, however, it became apparent that airlines saw demand plummet as they see lower demand.
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