By BLOOMBERG
HONG KONG • The crisis engulfing the aviation industry deepened after some of the world’s biggest international carriers announced drastic measures to cope with the coronavirus outbreak, with giants Emirates and Singapore Airlines Ltd among the latest to slash flights.
Dubai-based Emirates will stop flying passengers for two weeks starting March 25 because of travel restrictions. Singapore Airlines said yesterday it’s cutting 96% of its capacity through April, mirroring an announcement by Hong Kong’s Cathay Pacific Airways Ltd last Friday.
Airlines across the globe, estimated to be facing more than US$100 billion (RM444 billion) in lost revenue this year, are being forced to make unprecedented groundings and furloughing staff. Though large carriers should have adequate liquidity to ride out the crisis through June, smaller and less liquid operators may collapse without more support from shareholders and governments, according to Moody’s Investors Service.
In Asia, Singapore Airlines said it was unclear when it could resume normal services after grounding 185 of 196 aircraft. CEO Goh Choon Phong said his base salary will be cut by 30% from April 1, a bigger reduction than the 15% announced earlier. Pay for executive VPs and senior VPs will be lowered by 25% and 20% respectively, he said in a memo to staff. Other measures include compulsory unpaid leave for pilots on varying days every month. In all, about 10,000 employees will be affected.
Singapore Airlines’ shares plunged 11% yesterday, closing at the lowest since 1998. They’ve fallen for nine-straight trading days and have lost 33% in March alone.
Other major carriers including Delta Air Lines Inc and American Airlines Group Inc are waiting for a bailout package to be cleared, while in China, the government has lowered fees and may back mergers of struggling smaller airlines into the bigger state-backed ones. The government has started taking steps to control the parent of Hainan Airlines Holding Co Ltd.
The International Air Transport Association forecasts the global airline industry needs government aid and bailout measures of as much as US$200 billion to survive the crisis. Manufacturing giants Boeing Co and Airbus SE are also in talks about state support, while Embraer SA is placing some workers on unpaid leave.
Air France-KLM appears increasingly likely to seek more funds. The carrier could be one of two companies in which the French government holds a sizeable stake that may be in need of a “massive cash injection”, according to Nicolas Dufourcq, head of state-controlled lender Bpifrance.
Bloomberg News reported that the airline is poised to tap loans backed by the French government, which holds a 14% stake. Air France-KLM has said it may cancel as much as 90% of capacity and has drawn on credit facilities. Meanwhile, global airport operator Vinci SA said yesterday that passenger numbers dropped 40% in the first three weeks of March and withdrew its financial targets for the year.
Regional Express Holdings Ltd, which flies to smaller towns and remote parts of Australia, said the country’s airlines may need a bail-out of A$4.6 billion (RM11.54 billion), which is six times the amount the government has provided thus far. Qantas Airways Ltd and Virgin Australia Holdings Ltd have axed international flights and slashed capacity.
Moody’s forecasts industry capacity could be cut by more than 60% on average in the second quarter, or over 75% in some cases on a year-on-year basis, depending on the airline’s geographic base and if its operating model is domestic, long-haul or both. Some may cut services altogether in April, Moody’s said. Cathay’s low-cost unit Hong Kong Express Airways Ltd said last Friday it would suspend all flights from March 23 to April 30.
Even in countries where flights had been operating relatively normally, people have changed the way they travel. India, for example, has ordered airlines to keep an empty seat between passengers, according to a circular from the Director General of Civil Aviation. The regulator also called for at least 1m of spacing between passengers at check-in counters, and an “adequate distance” to be kept by cabin crew when serving customers.
Assuming the spread of the virus slows by the end of June and demand rebounds, airline capacity globally will fall 25% to 35% this year, Moody’s said, noting that there is still a high degree of uncertainty around forecasts because virus-related events are unfolding so rapidly. Long-term demand for travel should be robust and grow steadily, but the virus may have a lasting impact that reshapes the industry, according to the report. — Bloomberg
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