As pressure on airlines grows, many plan to sack, sideline staff

Air New Zealand says it expects to lay off about a third of its workforce after grounding almost all its flights.

Air New Zealand has become one of the latest carriers to suspend or lay off large portions of its workforce as airlines struggle under government restrictions to control the spread of the coronavirus [File: Daniel Munoz/Reuters]
Air New Zealand has become one of the latest carriers to suspend or lay off large portions of its workforce as airlines struggle under government restrictions to control the spread of the coronavirus [File: Daniel Munoz/Reuters]

The number of global airlines projecting layoffs, furloughs and capacity cuts over the next few months is growing, with Air New Zealand sounding the latest warning, saying it expects staffing levels to be 30 percent smaller than it is now, due to the coronavirus pandemic.

Airlines have been rushing to shore up liquidity, reduce capital expenditure and cut costs to stay afloat amid one of the worst crisis to hit the global aviation industry.

Air New Zealand said on Tuesday it will lay off about 3,500 employees, nearly a third of its workforce, in the coming months, as the outbreak forced it to cancel nearly all flights. New Zealands national carrier, which employs 12,500 people, warned the layoffs estimate was a conservative assumption and the numbers could rise if the domestic lockdown and border restrictions were extended.

The virus “has seen us go from having revenue of [5.8 billion New Zealand dollars] ($3.5bn) to what is shaping up to be less than [500 million New Zealand dollars] ($301m) annually,” Chief Executive Officer Greg Foran told staff in an email. “We expect that even in a year’s time we will be at least 30 percent smaller than we are today.”

In Australia, Virgin Australia Holdings Ltd said it was seeking a possible government loan of $1.4 billion  Australian dollars ($864m) which could convert to equity under certain circumstances to help it weather the coronavirus crisis.

Virgin’s shares are tightly controlled by foreign airlines including Singapore Airlines Ltd, Etihad Airways and Chinese conglomerate HNA Group that have also seen a sharp deterioration in revenues.

Last week, Singapore Airlines said it would receive up to $13bn in funding from the country’s sovereign wealth fund, Temasek in the single largest bailout of an airline affected by coronavirus shutdowns.

Lifeline for US airlines

In the United States, American Airlines Holdings Inc intends to apply for up to $12bn in government aid, ensuring no involuntary layoffs or pay cuts in the next six months, executives said in a memo to employees on Monday.

American is eligible for about $6bn in payroll grants and $6bn in loans under a stimulus package meant to help airlines and other businesses weather a downturn from the coronavirus.

Between the government funds and its own cash position, American will be able to fly “through even the worst of potential future scenarios,” Chief Executive Officer Doug Parker and President Robert Isom said in the memo.

American, with the largest number of employees of any US carrier, also plans to improve the terms of voluntary unpaid leave and early retirement options for flight attendants and other employees, it said.

American had 133,700 full-time employees in 2019, about 85 percent of whom were represented by unions. Wages and benefits are its largest operating expense, representing 34 percent of the total.

Low-cost US carrier Spirit Airlines Inc is cancelling all flights to and from the New York region after US officials warned against travel to the area because of the pandemic.

US airlines have been pushing the Treasury to release up to $58bn in government grants and loans and had threatened to quickly start laying off tens of thousands of workers within days if they did not get a bailout.

The $2.2 trillion stimulus and assistance legislation signed into law last week by President Donald Trump giving passenger airlines $25bn in cash assistance to cover payroll costs and $25bn in loans, while cargo carriers are eligible for $4bn in grants and $4bn in loans.

Treasury faces an April 1 deadline to issue procedures to airlines to apply for grants.

Meanwhile, Air Canada will cut second-quarter capacity by 85 percent-90 percent, place about 15,200 unionised employees off duty and furlough about 1,300 managers, beginning on or about April 3.

Canada’s largest airline said it is drawing down about 1 billion Canadian dollars ($706m) in credit to bolster liquidity, while senior executives will forgo between 25 percent-50 percent of their salary and board members agreed to a 25 percent cut.

In the United Kingdom, budget carrier EasyJet grounded its fleet of 344 planes and has no clear idea when it might resume flights, the company said on Monday.

EasyJet said it would lay off its 4,000 UK-based cabin crew for two months, meaning they will not work from April 1 but will get 80 percent of their average pay under a state job retention scheme.

Smaller British airline Loganair said on Monday it would seek state aid.

Germany’s Lufthansa said 27,000 of its staff would reduce hours.

Source: Reuters

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