BANGKOK: It has been greater than a yr since Captain Dejphon Poolpun final took to the skies.
The Thai Airways pilot has not acquired any flying allowance in any respect, whereas his fundamental wage was lower as the corporate suffered billions of losses.
The hiatus in flying has meant an entire change in his life-style. As of late, 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 on-line store Flying Sweets. The enterprise has discovered a large group of loyal prospects.
“Up to now yr… I made greater than US$3,000 a month,” he informed CNA. “In someday, I may promote 300 brownies when the enterprise was booming.”
Because of the pandemic, he misplaced 60 per cent of his wage as a pilot.
Capt Dejphon’s circumstances will not be distinctive for these within the aviation business. Throughout the area, many pilots and flight attendants have been laid off, whereas others are pressured to take substantial pay cuts. Many needed to complement their revenue by promoting meals or different items.
Whereas Capt Dejphon is likely one of the success tales of how airline workers have been capable of adapt to the sudden downturn, there are those that needed to promote their homes and automobiles to repay their money owed.
In the meantime, airways proceed to endure 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 Chapter Courtroom. In the meantime, others like Malaysia Airways and Garuda Indonesia have been engaged in negotiation processes with airplane leasing companies and collectors to restructure their loans.
For some, there is perhaps mild on the finish of the tunnel. Buoyed by the robust home market, Garuda Indonesia has mentioned that it is perhaps on its technique to make a revenue this yr whereas pilots working for the airline mentioned that their workload and salaries are slowly returning to regular.
In the meantime, Thailand is hoping to progressively reopen some elements of the nation to international guests in a bid to kickstart its tourism business, one of many nation’s primary financial sectors.
However the path to restoration continues to be murky, mentioned business gamers and analysts interviewed by CNA. A brand new wave of COVID-19 infections may power governments to carry again journey restrictions, cut back buyer confidence and derail plans to revive tourism.
The pandemic has induced an enormous 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. Final yr, the determine fell to 2.8 million. In consequence, the corporate recorded a web lack of US$1.07 billion.
It was a devastating blow for the Indonesian flag service, which in 2019 reaped a revenue of US$122.4 million.
Due to the pandemic, Garuda determined to put off 700 everlasting workers and contract staff whereas 15,000 others have been pressured to take a pay lower of as much as 50 per cent. Garuda additionally liquidated six of its subsidiaries in a bid to streamline the corporate.
“The continuing pandemic … had compelled the corporate to create a lot of changes,” Garuda CEO Irfan Setiaputra mentioned in a press release on Could 21. “Now we have to take these steps to outlive on this unsure time.”
In lieu of a bailout, the Indonesian authorities agreed to buy US$600 million in newly issued bonds in November 2020, injecting recent capital to the ailing firm. On the time, Garuda already had detrimental web working capital and had liabilities exceeding 80 per cent of its belongings.
Thai Airways encountered even larger losses. Though the corporate managed to hold 5.87 million passengers final yr, 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.
The pandemic-induced monetary woes pressured Thai Airways to file a enterprise reorganisation petition to the Central Chapter Courtroom in Could final yr. In its petition, the flag service declared its debt to be price greater than US$11.3 billion, as of March 31, which exceeded its belongings.
Because the submission, the airline has carried out numerous measures to chop prices and improve income. These embody downsizing headcount from 29,000 to between 14,000 and 15,000, lowering the variety of plane in its fleet and asking workers to take go away with out pay.
In the meantime, in response to 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 yr earlier than.
Bangkok-based aviation analyst Suwat Wattanapornprom of Asia Plus Securities mentioned Thai Airways’ money readily available may solely be sufficient to final the corporate till early 2022. This, he mentioned, may result in a liquidity problem as soon as the nation decides to reopen worldwide flights.
“By that point, when flights resume, Thai Airways might not have sufficient money readily available for the set-up. It’s because as soon as it begins the rehabilitation, it’s going to cease paying the collectors. However this additionally means the corporate could be required to finish money transactions for every part when it flies to any nation,” Suwat informed CNA.
Malaysia Airways is perhaps going through a fair trickier scenario.
The corporate 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 service 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 Airways Berhad was not on monitor, 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 Airways mentioned that these figures are confidential.
Nevertheless, the Malaysian Aviation Fee (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 site visitors drop to just about zero within the second quarter of final yr. The whole variety of passengers up till the third quarter is lower than 5 million.
As for losses, Malaysia Airways has but to file its 2020 monetary statements with the Corporations Fee 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 whole administration workforce and workers and no-pay go away as early as March 2020. Malaysia Airways said that regardless of the decreased demand of general capability, there have been no layoffs.
Captain Izham Ismail, the chief government of Malaysia Airways’ father or mother firm Malaysia Aviation Group’s (MAG) informed CNA in Could that the airways’ general passenger and fleet capability has been lower by 90 per cent since October 2020. He additionally mentioned in Could that he anticipated it to stay at that stage for the following six months.
Some excellent news emerged in late January 2021 as MAG obtained approval from the Excessive Courtroom 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 yr he had seen throughout his 32-year profession with the corporate.
“Our fundamental wage was lower by 30 per cent,” the 54-year-old pilot, who like many Indonesians goes with one title, informed CNA. “In the meantime, I used to be barred from flying as a result of the corporate thought of senior pilots like myself to be extra prone (to COVID-19) than youthful 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.
However even youthful pilots and flight attendants have been affected by decreased flight hours. “There have been occasions once 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 however lots of my friends did,” he mentioned.
“There have been many individuals who needed to promote their automobiles and even promote their homes and have to maneuver again to their dad and mom’ homes simply to get by. There have been many individuals who needed to begin a web based meals enterprise to complement their revenue as a result of they weren’t making sufficient cash.”
He mentioned the difficult situation lasted for a couple of months in the course of the early days of the pandemic when the federal government imposed tight journey restrictions. However slowly, the travellers, particularly these on home routes, returned after the restrictions have been eased.
“By December our fundamental salaries have been restored again to the best way they have been earlier than the pandemic. At present, nobody is pressured to promote meals or items on-line anymore,” he mentioned.
However pilots and flight attendants nonetheless face uncertainties concerning their flight time, which impacts bonuses and allowances.
Between Could 6 and Could 17, the Indonesian authorities imposed a decent journey restriction to forestall thousands and thousands of individuals within the predominantly Muslim nation from heading to their hometown to have fun the most important Islamic vacation Idul Fitri.
The restriction induced all Indonesian airways to slash the variety of flights by 90 per cent, in response to figures from the Transportation Ministry.
“The situation continues to be unstable. Nobody is aware of for positive if or when these journey restrictions will likely be imposed once more,” Capt Muzeni mentioned.
And there have been measures by the corporate to chop down the variety of workers.
In a press release issued on Could 21, Garuda introduced that it’s providing an early retirement programme for volunteering workers.
The corporate’s CEO, Mr Setiaputra mentioned within the assertion that the early retirement programme is “the perfect resolution that we will supply to workers within the midst of this pandemic scenario.”
In the meantime, Thai Airways has requested its workers to take go away with out pay to assist the corporate keep afloat. Capt Dejphon is likely one of the individuals who joined the programme.
“It may be 10 to fifteen days, relying on what we wish. Because the firm’s scenario isn’t so good, I attempt to take go away with out pay as a lot as I can, which is about 10 days. So, in whole greater than half of my revenue is gone,” he mentioned, including that he solely got here to work for flight simulator trainings.
However Capt Dejphon mentioned that he has one thing to stay up for. He’s scheduled to fly once more in October, when Thailand goals to reopen elements of the nation for worldwide tourism.
ROAD TO RECOVERY
Malaysia Airways’ CEO informed CNA that the corporate is embarking on a lot of cost-cutting measures which embody in search of cost deferrals and contract renegotiations.
“The group ultimately launched into a holistic restructuring of (Malaysia Airways’) steadiness sheet and value construction in September,” Capt Izham mentioned.
This restructuring train, he mentioned, helped cut back Malaysia Airways’ RM15 billion (US$3.6 billion) price of liabilities and eradicated RM10 billion in debt, together with RM5.7 billion in whole value financial savings and prices avoidance.
“RM510 million has been achieved in Q1 2021 in value financial savings and plane deferrals, and MAG is focusing on one other RM1 billion by the top of the yr” Capt Izham mentioned.
Within the meantime, in its place income stream, he mentioned, Malaysia Airways had began promoting its Enterprise Suite inflight merchandise, from cover units, pyjamas and amenity kits, in addition to the airline’s signature satay dish and salted peanuts.
The Malaysia Airways CEO mentioned the corporate is gearing up for a gradual restoration of its operations.
“We have been planning to deploy extra passenger and fleet capability within the first half of 2021, to succeed in 30 per cent of 2019 ranges, and 70 per cent by the second half,” he mentioned.
In the meantime in Thailand, the Central Chapter Courtroom is anticipated to problem a ruling on Jun 15 on Thai Airways’ rehabilitation plan. The corporate has mentioned that the plan would allow the airline to generate revenue as soon as extra by 2023.
“Beneath the preliminary rehabilitation plan, the corporate would return to profitability via the standard operations of its primary enterprise in 2023 and its shareholders’ fairness would worth greater than zero in 2030,” mentioned its appearing president Chansin Treenuchagron in a letter to the president of the Inventory Trade 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 trade debt for possession of the corporate.
Thai Airways additionally plans to function underneath a brand new imaginative and prescient, the place it repositions itself as “a non-public high-quality full-service service with a powerful Thai model”.
Based mostly on the corporate’s assertion in March, it will embody redesigning its product to ship “a high-quality expertise” at a decrease value and unbundling fares in order that passengers can select to pay for what they need, akin to 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 identical transfer. In keeping with its September 2020 monetary report, the airline was working 210 plane in its fleet. The determine had been decreased to 142 not too long ago because it returned a few of its leased planes.
The airline is reportedly seeking to slash down its fleet much more and cut back the variety of airplanes to 70. The corporate has refused to touch upon the studies.
With all these cost-cutting measures in place, Garuda has predicted that it’ll begin to flip a revenue by the top of the yr.
In a letter to the Indonesian Inventory Trade in February, the corporate highlighted that the variety of passengers had gone from a median of 150,000 passengers per thirty days in the course of the early days of the pandemic to round 1 million passengers a month in the direction of the top of 2020.
Garuda hopes to hold round 7.5 million passengers this yr – about half of what it carried earlier than the pandemic – as the federal government progressively relaxes the nation’s journey restrictions.
DARK CLOUDS PERSIST
In an April press launch, the Worldwide Air Transport Affiliation (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 yr.
Regardless of some hope for a modest restoration, these interviewed by CNA mentioned many uncertainties stay.
Yeah Kim Leng, a professor of economics at Sunway College Enterprise Faculty, 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.
“Nevertheless, darkish clouds nonetheless persist attributable to virus resurgence and vaccine provide shortages, however the airline business is seeing mild on the finish of the tunnel, though this is perhaps longer in comparison with different industries hit by COVID-19,” Prof Yeah informed CNA.
Within the brief time period, the outlook for air journey within the ASEAN area, he mentioned, appeared difficult attributable to quarantine measures, restricted and even closed borders.
“On condition that the restoration in air journey is strongly tied to the relief of COVID-19 journey restrictions, the regional carriers must be financially ready to face one other yr or two of working losses,” Prof Yeah added.
Jakarta-based aviation analyst Alvin Lie added that airways around the globe have already achieved what they may to mitigate the decline in passengers and steep monetary losses.
“Airways have been chopping again on their assets and providers, choosing solely routes which make financial sense whereas branching out into different sectors like cargo. They’ve renegotiated their loans, tried to return leased planes, deferred funds to traders and a few utilized for presidency bailouts. They’re now in a survival mode,” Mr Lie famous.
“The pandemic nonetheless meant that the situation is unstable. There may very well be extra journey restrictions sooner or later. This has a really enormous influence on an airline’s efficiency as a result of some airways rely on peak seasons like Chinese language New Years and Idul Fitri, occasions when these journey restrictions are often in place.”
Mr Lie believed that there’s nothing extra an airline may do at this stage including that the onus is now on the governments to maintain the pandemic underneath management.
“Governments solely must mitigate COVID-19 properly and achieve this persistently. If they will handle the pandemic properly, vacationers will come. However in at present’s situation, irrespective of how a lot promotion an airline does, nobody will come,” he mentioned.
COVID-19 have modified the best way individuals journey, socialise and work together and Mr Lie believed that a few of these adjustments are right here to remain, even after the pandemic is over.
“Individuals now realise that in some circumstances, we need not meet face-to-face. We will do issues faster and extra effectively by assembly on-line with out sacrificing high quality and effectiveness,” he mentioned.
“Individuals will nonetheless journey. People are social creatures in any case. They should meet family members. They should go on vacation. However for enterprise journey, the sample is altering and airways should be prepared for these adjustments.”
Thai Airways’ Capt Dejphon mentioned that he welcomes the potential adjustments in airways tradition and mindsets caused by the pandemic.
“COVID-19 has introduced alternative,” he mentioned. “It’s like performing surgical procedure on a affected person – function on the organisation, take away the outdated system and have a recent begin.”