MAB C-suites take 35% pay cuts, sweeping cost reductions imposed

CEO Izham says sacrifices will have to be made and warns that these measures could be extended, if the situation does not improve

by RAHIMI YUNUS/ pic by RAZAK GHAZALI

MALAYSIA Airlines Bhd (MAB) has slashed the salary of its top management including its CEO by 35%, reduced 50% of the directors’ monthly fee and imposed sweeping operational expenses cut in the most drastic measures to save the struggling carrier from financial ruin.

The state-owned carrier was already in the red prior to the coronavirus pandemic. But the Covid-19 plague has drilled a bigger hole into the carrier’s cashflow as thousands of flights have been cancelled and its fleet of about 110 planes sat idle on the tarmac.

The global airline industry is facing the worst crisis in aviation history with millions of jobs expected to be axed and passenger revenues could plummet by US$252 billion (RM1.09 trillion).

Group CEO Captain Izham Ismail said top management, or C-suite executives including himself, will take a 35% total gross income pay cut, while assistant managers to GMs and equivalent will take a 10% to 25% salary deductions, effective this month.

In a circular to staff sighted by The Malaysian Reserve (TMR), Izham said the board members are taking a voluntary 50% pay cut from their monthly fees.

Those approved for a three-month voluntary unpaid leave remain status quo. Besides salary reductions and no overtime claims across the group, the company also froze handphone claims, transport allowance for the sales team and car allowance for GMs and above, effective April for three months.

Izham warned that these measures could be extended, if the situation does not improve.

“During times like these, those at leadership or management level will need to take the lead in protecting the rest of the organisation. This is going to be painful for now, but it is what it takes to save jobs from being lost at this stage,” Izham said in the internal communication released yesterday.

The CEO also announced streamlining of allowances including the removal of disturbance allowance and harmonisation of shift allowance calculator for licensed aircraft engineers and technicians.

Malaysia Aviation Group’s tech crew, not including cadet pilots, will have to take salary cuts, reduced management pilots’ allowance, 25% cut for productivity allowance rate for pilots and termination of post holder allowance.

“It was not an easy decision for me to make, but in order for all of us to continue maintaining our livelihood and ensure the sustainability of the company, sacrifices will have to be made,” Izham said.

He said the national carrier already booked seat cancellations totalling RM2.04 billion, with network sales plunging by 52% year-on-year. Booking cancellations started in late January and forward bookings were on a downtrend, he

said, forcing the carrier to reduce its capacity by 50% on March 18 to 80% a week later and to 94% currently.

He said MAB’s efforts in reaching out to original equipment manufacturers and vendors for contract negotiations have not yielded significant results and the unprecedented closure of borders by governments worldwide further compounded the magnitude of the company’s cash burn.

“I want you to remember my commitment to you at our last town hall that I would do everything humanly possible before going to the next phase, impacting your salaries and job security, but unfortunately, the measures taken have not been able to sustain our cash position at the desired level,” Izham said.

TMR reported that Khazanah Nasional Bhd, the sole owner of MAB, is doing “the best it can” to support the group, although capital needs were said to be difficult to be determined due to the fluidity of the pandemic.

The International Air Transport Association (IATA) has made an urgent call for governments in the Asia-Pacific region including Malaysia to quickly roll out an aviation-specific relief package to help local carriers.

IATA said airlines are expected to post a net loss of US$39 billion in the second quarter ending June 30, 2020 (2Q20), and the impact of that on cash burn will be amplified by a US$35 billion liability for potential ticket refunds.

Without relief, it said the industry’s cash position could deteriorate by US$61 billion in 2Q20.

IATA forecast that Malaysia could see passenger demand in 2020 reduced by 39% based on a scenario where severe restrictions on travel are lifted after three months, followed by gradual recovery.

The association also viewed a possible reduction of over 25 million passenger demand, some US$3.3 billion revenue impact, close to 170,000 job losses and US$3.8 billion potential GDP impact.