BANGKOK: It has been greater than a 12 months since Captain Dejphon Poolpun final took to the skies.
The Thai Airways pilot has not obtained any flying allowance in any respect, whereas his primary wage was reduce as the corporate suffered billions of losses.
The hiatus in flying has meant a whole change in his life-style. These days, he spends a lot of his time within the kitchen of his Bangkok dwelling, the place he bakes tray after tray of brownies for his online store Flying Sweets. The enterprise has discovered a large group of loyal prospects.
“In the past year… I made more than US$3,000 a month,” he advised CNA. “In one day, I could sell 300 brownies when the business was booming.”
Due to the pandemic, he misplaced 60 per cent of his wage as a pilot.
Capt Dejphon’s circumstances aren’t distinctive for these within the aviation business. Across the area, many pilots and flight attendants have been laid off, whereas others are compelled to take substantial pay cuts. Many needed to complement their earnings by promoting meals or different items.
While Capt Dejphon is likely one of the success tales of how airline workers had been in a position to adapt to the sudden downturn, there are those that needed to promote their homes and vehicles to repay their money owed.
Meanwhile, airlines proceed to undergo losses, forcing firms to downsize their fleet and workers and make drastic adjustments to their enterprise methods.
Thai Airways, for instance, needed to file a enterprise reorganisation petition to the nation’s Central Bankruptcy Court. Meanwhile, others like Malaysia Airlines and Garuda Indonesia have been engaged in negotiation processes with airplane leasing companies and collectors to restructure their loans.
For some, there is likely to be mild on the finish of the tunnel. Buoyed by the robust home market, Garuda Indonesia has mentioned that it is likely to be on its strategy to make a revenue this 12 months whereas pilots working for the airline mentioned that their workload and salaries are slowly returning to regular.
Meanwhile, Thailand is hoping to step by step reopen some components of the nation to overseas guests in a bid to kickstart its tourism business, one of many nation’s important financial sectors.
But the path to recovery continues to be murky, mentioned business gamers and analysts interviewed by CNA. A brand new wave of COVID-19 infections might pressure governments to carry again journey restrictions, cut back buyer confidence and derail plans to revive tourism.
The pandemic has brought on a large drop within the variety of passengers worldwide and carriers from the area haven’t been spared.
In 2019, Garuda carried greater than 15 million passengers. Last 12 months, the determine fell to 2.8 million. As a consequence, the corporate recorded a web lack of US$1.07 billion.
It was a devastating blow for the Indonesian flag provider, which in 2019 reaped a revenue of US$122.4 million.
Because of the pandemic, Garuda determined to put off 700 everlasting workers and contract employees whereas 15,000 others had been compelled to take a pay reduce of as much as 50 per cent. Garuda additionally liquidated six of its subsidiaries in a bid to streamline the corporate.
“The ongoing pandemic … had compelled the company to create a number of adjustments,” Garuda CEO Irfan Setiaputra mentioned in a press release on May 21. “We have to take these steps to survive in this uncertain time.”
In lieu of a bailout, the Indonesian authorities agreed to buy US$600 million in newly issued bonds in November 2020, injecting contemporary capital to the ailing firm. At the time, Garuda already had unfavorable web working capital and had liabilities exceeding 80 per cent of its belongings.
Thai Airways encountered even greater losses. Although the corporate managed to hold 5.87 million passengers final 12 months, the determine was a 76 per cent drop from 2019. The dramatic loss in passengers was one of many the explanation why Thai Airways recorded a web lack of US$4.5 billion.
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The pandemic-induced monetary woes compelled Thai Airways to file a enterprise reorganisation petition to the Central Bankruptcy Court in May final 12 months. In its petition, the flag provider declared its debt to be price greater than US$11.3 billion, as of March 31, which exceeded its belongings.
Since the submission, the airline has applied numerous measures to chop prices and enhance income. These embody downsizing headcount from 29,000 to between 14,000 and 15,000, decreasing the variety of plane in its fleet and asking workers to take depart with out pay.
Meanwhile, in line with the corporate’s monetary statements, Thai Airways solely had US$278 million in money and money equivalents on the finish of 2020, in comparison with US$695 million the 12 months earlier than.
Bangkok-based aviation analyst Suwat Wattanapornprom of Asia Plus Securities mentioned Thai Airways’ money available would possibly solely be sufficient to final the corporate till early 2022. This, he mentioned, might result in a liquidity subject as soon as the nation decides to reopen worldwide flights.
“By that time, when flights resume, Thai Airways may not have enough cash on hand for the set-up. This is because once it begins the rehabilitation, it will stop paying the creditors. But this also means the company would be required to complete cash transactions for everything when it flies to any country,” Suwat advised CNA.
Malaysia Airlines is likely to be dealing with an excellent trickier scenario.
The firm has been recording losses for a decade, made worse by the dual tragedies of MH370’s disappearance and the MH17 shoot-down in Ukraine in 2014. The Malaysian flag provider was subsequently privatised and brought over by sovereign wealth fund Khazanah Nasional.
Even earlier than the pandemic hit, Khazanah Nasional admitted that its try and turnaround Malaysia Airlines Berhad was not on observe, in a report launched by the parliament’s Public Accounts Committee, regardless of pouring in a complete of US$1.5 billion.
When requested by CNA on how COVID-19 has affected passenger numbers, Malaysia Airlines mentioned that these figures are confidential.
However, the Malaysian Aviation Commission (MAVCOM) publishes a quarterly Waypoint Report on the nation’s aviation business. In December 2020, MAVCOM famous that every one Malaysian carriers, together with MAS, noticed their passenger visitors drop to just about zero within the second quarter of final 12 months. The complete variety of passengers up till the third quarter is lower than 5 million.
As for losses, Malaysia Airlines has but to file its 2020 monetary statements with the Companies Commission of Malaysia. Its 2019 financials confirmed a income of RM9 billion however a web lack of RM923.79 million after tax.
The pandemic prompted the corporate to introduce in depth wage cuts for the complete administration workforce and workers and no-pay depart as early as March 2020. Malaysia Airlines said that regardless of the decreased demand of general capability, there have been no layoffs.
Captain Izham Ismail, the chief govt of Malaysia Airlines’ guardian firm Malaysia Aviation Group’s (MAG) advised CNA in May that the airlines’ general passenger and fleet capability has been reduce by 90 per cent since October 2020. He additionally mentioned in May that he anticipated it to stay at that stage for the subsequent six months.
Some excellent news emerged in late January 2021 as MAG obtained approval from the High Court of England and Wales to convene a listening to with its collectors for a restructuring proposal.
This was later adopted by the courtroom’s clearance for MAG to maneuver ahead with the restructuring scheme, which is able to see MAG’s sole shareholder Khazanah Nasional pumping in RM3.6 billion to fund MAG till 2025
“THERE WERE TIMES WE WOULDN’T FLY FOR WEEKS”
A senior Garuda Indonesia pilot, Captain Muzaeni mentioned 2020 was the worst 12 months he had seen throughout his 32-year profession with the corporate.
“Our basic salary was cut by 30 per cent,” the 54-year-old pilot, who like many Indonesians goes with one identify, advised CNA. “Meanwhile, I was barred from flying because the company considered senior pilots like myself to be more susceptible (to COVID-19) than younger pilots.”
The ban meant that he was not incomes any flying allowances and bonuses, which he mentioned can account to wherever from one fifth to a half of what a flight crew makes every month.
But even youthful pilots and flight attendants had been affected by decreased flight hours. “There were times when we wouldn’t fly for weeks,” he recounted.
Capt Muzaeni mentioned he was lucky that he nonetheless earned sufficient cash to assist his household. “I didn’t have any instalments or loans to pay but many of my peers did,” he mentioned.
“There were many people who had to sell their cars or even sell their houses and have to move back to their parents’ houses just to get by. There were many people who had to start an online food business to supplement their income because they weren’t making enough money.”
He mentioned the difficult situation lasted for a couple of months throughout the early days of the pandemic when the federal government imposed tight journey restrictions. But slowly, the travellers, particularly these on home routes, returned after the restrictions had been eased.
“By December our basic salaries were restored back to the way they were before the pandemic. Today, no one is forced to sell food or goods online anymore,” he mentioned.
But pilots and flight attendants nonetheless face uncertainties relating to their flight time, which impacts bonuses and allowances.
Between May 6 and May 17, the Indonesian authorities imposed a decent journey restriction to stop hundreds of thousands of individuals within the predominantly Muslim nation from heading to their hometown to have fun the main Islamic vacation Idul Fitri.
The restriction brought on all Indonesian airlines to slash the variety of flights by 90 per cent, in line with figures from the Transportation Ministry.
“The condition is still unstable. No one knows for sure if or when these travel restrictions will be imposed again,” Capt Muzeni mentioned.
And there have been measures by the corporate to chop down the variety of workers.
In a press release issued on May 21, Garuda introduced that it’s providing an early retirement programme for volunteering workers.
The firm’s CEO, Mr Setiaputra mentioned within the assertion that the early retirement programme is “the best solution that we can offer to employees in the midst of this pandemic situation.”
Meanwhile, Thai Airways has requested its workers to take depart with out pay to assist the corporate keep afloat. Capt Dejphon is likely one of the individuals who joined the programme.
“It can be 10 to 15 days, depending on what we want. Since the company’s situation isn’t so good, I try to take leave without pay as much as I can, which is about 10 days. So, in total more than half of my income is gone,” he mentioned, including that he solely got here to work for flight simulator trainings.
But Capt Dejphon mentioned that he has one thing to stay up for. He is scheduled to fly once more in October, when Thailand goals to reopen components of the nation for worldwide tourism.
ROAD TO RECOVERY
Malaysia Airlines’ CEO advised CNA that the corporate is embarking on various cost-cutting measures which embody searching for fee deferrals and contract renegotiations.
“The group eventually embarked on a holistic restructuring of (Malaysia Airlines’) balance sheet and cost structure in September,” Capt Izham mentioned.
This restructuring train, he mentioned, helped cut back Malaysia Airlines’ RM15 billion (US$3.6 billion) price of liabilities and eradicated RM10 billion in debt, together with RM5.7 billion in complete value financial savings and prices avoidance.
“RM510 million has been achieved in Q1 2021 in cost savings and aircraft deferrals, and MAG is targeting another RM1 billion by the end of the year” Capt Izham mentioned.
In the meantime, instead income stream, he mentioned, Malaysia Airlines had began promoting its Business Suite inflight merchandise, from quilt units, pyjamas and amenity kits, in addition to the airline’s signature satay dish and salted peanuts.
The Malaysia Airlines CEO mentioned the corporate is gearing up for a gradual recovery of its operations.
“We were planning to deploy more passenger and fleet capacity in the first half of 2021, to reach 30 per cent of 2019 levels, and 70 per cent by the second half,” he mentioned.
Meanwhile in Thailand, the Central Bankruptcy Court is anticipated to subject a ruling on Jun 15 on Thai Airways’ rehabilitation plan. The firm has mentioned that the plan would allow the airline to generate revenue as soon as extra by 2023.
“Under the preliminary rehabilitation plan, the company would return to profitability through the usual operations of its main business in 2023 and its shareholders’ equity would value more than zero in 2030,” mentioned its appearing president Chansin Treenuchagron in a letter to the president of the Stock Exchange of Thailand (SET) in March.
In the identical letter, Mr Chansin mentioned the corporate plans to restructure the corporate’s capital and debt, together with an incentive for collectors to change debt for possession of the corporate.
Thai Airways additionally plans to function below a brand new imaginative and prescient, the place it repositions itself as “a private high-quality full-service carrier with a strong Thai brand”.
Based on the corporate’s assertion in March, it will embody redesigning its product to ship “a high-quality experience” at a decrease value and unbundling fares in order that passengers can select to pay for what they need, resembling checked-in baggage and seat choices.
The airline additionally plans to optimise its routes by solely flying to worthwhile locations and restructure the organisation to an acceptable dimension. It expects to slash about 50 per cent of its workforce in addition to change its leases and fleet.
Garuda Indonesia appears to be making an analogous transfer. According to its September 2020 monetary report, the airline was working 210 plane in its fleet. The determine had been decreased to 142 lately because it returned some of its leased planes.
The airline is reportedly trying to slash down its fleet much more and cut back the variety of airplanes to 70. The firm has refused to touch upon the studies.
With all these cost-cutting measures in place, Garuda has predicted that it’s going to begin to flip a revenue by the tip of the 12 months.
In a letter to the Indonesian Stock Exchange in February, the corporate highlighted that the variety of passengers had gone from a median of 150,000 passengers per 30 days throughout the early days of the pandemic to round 1 million passengers a month towards the tip of 2020.
Garuda hopes to hold round 7.5 million passengers this 12 months – about half of what it carried earlier than the pandemic – as the federal government step by step relaxes the nation’s journey restrictions.
DARK CLOUDS PERSIST
In an April press launch, the International Air Transport Association (IATA) mentioned it expects web airline business losses of US$47.7 billion in 2021, an enchancment over the estimated web business lack of US$126.4 billion in 2020. The affiliation added that it expects the aviation business to start to get better within the latter a part of this 12 months.
Despite some hope for a modest recovery, these interviewed by CNA mentioned many uncertainties stay.
Yeah Kim Leng, a professor of economics at Sunway University Business School, famous that there was now some easing of pandemic-related turbulence for the airline business, as vaccines elevated in availability and journey restrictions have been eased in various levels.
“However, dark clouds still persist due to virus resurgence and vaccine supply shortages, but the airline industry is seeing light at the end of the tunnel, although this might be longer compared to other industries hit by COVID-19,” Prof Yeah advised CNA.
In the quick time period, the outlook for air journey within the ASEAN area, he mentioned, appeared difficult as a consequence of quarantine measures, restricted and even closed borders.
“Given that the recovery in air travel is strongly tied to the relaxation of COVID-19 travel restrictions, the regional carriers will have to be financially prepared to face another year or two of operating losses,” Prof Yeah added.
Jakarta-based aviation analyst Alvin Lie added that airlines around the globe have already performed what they might to mitigate the decline in passengers and steep monetary losses.
“Airlines have been cutting back on their resources and services, selecting only routes which make economic sense while branching out into other sectors like cargo. They have renegotiated their loans, tried to return leased planes, deferred payments to investors and some applied for government bailouts. They are now in a survival mode,” Mr Lie famous.
“The pandemic however meant that the condition is unstable. There could be more travel restrictions in the future. This has a very huge impact on an airline’s performance because some airlines depend on peak seasons like Chinese New Years and Idul Fitri, times when these travel restrictions are usually in place.”
Mr Lie believed that there’s nothing extra an airline might do at this stage including that the onus is now on the governments to maintain the pandemic below management.
“Governments only need to mitigate COVID-19 well and do so consistently. If they can manage the pandemic well, tourists will come. But in today’s condition, no matter how much promotion an airline does, no one will come,” he mentioned.
COVID-19 have modified the best way individuals journey, socialise and work together and Mr Lie believed that some of those adjustments are right here to remain, even after the pandemic is over.
“People now realise that in some circumstances, we don’t need to meet face-to-face. We can do things quicker and more efficiently by meeting online without sacrificing quality and effectiveness,” he mentioned.
“People will still travel. Humans are social creatures after all. They need to meet loved ones. They need to go on holiday. But for business travel, the pattern is changing and airlines have to be ready for these changes.”
Thai Airways’ Capt Dejphon mentioned that he welcomes the potential adjustments in airlines tradition and mindsets caused by the pandemic.
“COVID-19 has brought a good opportunity,” he mentioned. “It’s like performing surgery on a patient – operate on the organisation, remove the old system and have a fresh start.”