AS countries close their borders to passengers, especially from Covid-19 hit nations, airlines have started to feel the shivers with Malaysia’s Malindo Air citing cash flow constraints.
Some have announced cost-cutting measures such as salary cuts for management and cabin crew, while others reduced growth and passenger targets.
In Malaysia, Malindo Air seems to be the first to reveal “cost-cutting initiatives” linked to the Covid-19 outbreak.
An internal memo sighted by Bernama, with Malindo Air’s CEO Captain Mushafiz Mustafa Bakri’s name on it, says the airline had to curtail a vast number of its scheduled flight routes due to the operational challenges that were brought about by Covid-19.
Further to our earlier “cost-cutting initiative to stay afloat”, read the memo dated Feb 7, 2020, “this, in turn, has put a huge constraint on our cash flow.”
Given this position, Malindo Air has to stagger the payment of February 2020 salaries, it said.
The memo said all staff with a gross salary of RM5,000 or less will be paid in full today but those with a basic or gross salary of more than RM5,000 will only get the basic salary while the balance will be paid on March 7.
Efforts to contact Malindo Air for further clarity were unsuccessful.
Similarly, Thai Airways had on Wednesday announced salary cuts for management with its senior management voluntarily reducing their salaries by up to 25% for six months starting March.
The initiative was taken to alleviate losses from the impact of slowed down passenger travel following the outbreak, according to news reports.
Meanwhile, Hong Kong’s national carrier Cathay Pacific Airways has reduced flights and predicts a decrease in profit for the year.
The airline also asked its employees to take unpaid leave to decrease operational expenses as it potentially faces months of disruption ahead.
Malaysia’s low-cost airline AirAsia has cancelled selected flights to China, South Korea, and Taiwan in light of health concerns over the spread of Covid-19 and offers full refunds.
Research firm CGS-CIMB Research, in a note, expects the airline group to post a core net loss of RM1.1 bil following lower demand and yields in Malaysia, Thailand and the Philippines, given its significant exposure to flights to China, Hong Kong and Macau.
National flag-carrier Malaysia Airlines permitted cancellations with a full refund as well as free ticket alterations on flights to and from mainland China.
The International Air Transport Association (IATA) had announced that its initial assessment of the impact of Covid-19 shows a potential 13% full-year loss of passenger demand for carriers in the Asia-Pacific region.
Considering that growth for the region’s airlines was forecast to be 4.8%, the net impact will be an 8.2% full-year contraction compared to 2019 demand levels.
“In this scenario, that would translate into a US$27.8 bil revenue loss in 2020 for carriers in the Asia-Pacific region – the bulk of which would be borne by carriers registered in China, with US$12.8 bil loss in the China domestic market alone,” said IATA, which represents some 290 airlines comprising 82% of global air traffic. – Feb 28, 2020, Bernama
