Job cuts not enough to save airlines without additional govt relief

- A Monitor Desk Report 29 Oct, 2020 | 469 Views|-+
Dhaka: Most of the airlines are desperately trying to minimie costs and save cash in however they can but they will need to slash even more jobs if they want to survive the coronavirus crisis, said International Air Transport Association on October 27.

“While IATA is not advocating specific workforce reductions, maintaining last year’s level of labour productivity (ASKs/employee), would require employment to be cut 40 per cent,” said Alexandre de Juniac, CEO, IATA.

“Further jobs losses or pay cuts would be required to bring unit labour costs down to the lowest point of recent years, a reduction of 52 per cent from 2020 Q3 levels.” But around 50 per cent of airlines’ costs are fixed or semi-fixed, at least in the short-term. Therefore, costs have not fallen as fast as revenues. Even with a 40 per cent reduction in workforce sizes, total costs will still be higher than revenues in 2021 and airlines will continue to burn through cash.

Airlines currently are forecast to burn through another USD 77 billion of cash before the year is out. “Without additional government financial relief, the median airline has just 8.5 months of cash remaining at current burn rates. And we cannot cut costs fast enough to catch up with shrunken revenues,” de Juniac said.

Almost all carriers have reduced their workforces since the onset of the coronavirus pandemic. Cathay Pacific said earlier this month that it will cut around 5,300 jobs while Qantas and British Airways are also laying of thousands of staffs.

Total industry revenues in 2021 are expected to be down 46 per cent compared to the 2019 figure of USD 838 billion. “The fourth quarter of 2020 will be extremely difficult and there is little indication the first half of 2021 will be significantly better, so long as borders remain closed and/or arrival quarantines remain in place,” said de Juniac.

Looking forward to 2021, IATA estimates that to achieve a breakeven operating result and neutralise cash burn, unit costs will need to fall by 30 per cent compared to average CASK for 2020. De Juniac further said, “There is little good news on the cost front in 2021. Even if we maximise our cost cutting, we still won’t have a financially sustainable industry in 2021.”

Calling for additional financial relief and the re-opening of borders, de Juniac said that governments “must take firm action to avert this impending economic and labour catastrophe”.

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