Job cuts hard to avoid for SIA amid Covid-19 pandemic, say experts


  • AseanPlus News
  • Tuesday, 04 Aug 2020

Cutting staff costs, including through retrenchments, seems inevitable with continued low demand for air travel. - AFP

SINGAPORE (The Straits Times/ANN): Job cuts could be in the pipeline for Singapore Airlines (SIA), which is now overstaffed for current demand, experts said yesterday.

SIA could also try to cut costs in other areas, or possibly receive additional government support to tide it through the crisis, they added.

The airline had last week announced a net loss of $1.12 billion in the quarter ending June 30 - its worst quarterly showing. It also said it is reviewing the shape and size of its network over the longer term, given the impact of Covid-19 on air travel.

The International Air Transport Association has said it will take until 2024 for global passenger traffic to return to the level last year.

Nicholas Wyatt, head of research and analysis in travel and tourism at analytics firm GlobalData, said the recovery of international flights depends on how quickly the pandemic can be brought under control, but "there are few signs that this is happening".

But if airlines cut jobs excessively, they will be shorthanded should the market rebound quicker than expected, he added.

Other options to manage costs could include renegotiating deals with suppliers or cutting in-flight amenities, said Wyatt.

Joanna Lu, Asia's head of consultancy at Ascend by Cirium, said that cutting staff costs, including through retrenchments, seems inevitable with continued low demand for air travel.

"If there is no major breakthrough in containing the virus in the next couple of months, it is extremely challenging for SIA to sustain its business scale."

While SIA has registered strong demand for cargo transport and could benefit from green lane arrangements, Lu said these avenues are only small parts of its business compared with before Covid-19.

It is not uncommon to see airlines worldwide cutting staff costs through measures like voluntary retirements, furloughs and leaves of absence, she added.

Associate Professor Walter Theseira, an economist with the Singapore University of Social Sciences, noted that the crew manpower costs for SIA would have come down, given that crew are paid for the time spent in the air.

He said: "For SIA and other international airlines, it is really about whether their contracts allow them to pay crew the bare minimum and whether the crew want to stay on.

"I think what could work is if aircrew find outside jobs that take up a substantial portion of their time and be rostered to fly enough so as to keep their skills up, but that is easier said than done."

SIA expects its passenger capacity at the end of the second quarter of the 2020/2021 financial year to be at just 7 per cent compared with the level before Covid-19.

Separately, its chief executive Goh Choon Phong announced last week pay cuts for all management and rank-and-file staff, as well as early retirement for ground staff and pilots. He also told staff to brace themselves for additional measures.

In the last few months, SIA has also been boosting its balance sheet. It has raised $11 billion since its financial year started in April.

CIMB Private Banking economist Song Seng Wun said the Jobs Support Scheme, which subsidises up to 75 per cent of wages for local workers in the aviation sector, will be key to helping SIA retain workers. The scheme is set to stop after this month.

"I would say that there are compelling reasons for JSS to be extended for some industries which are still finding it extremely difficult to get back on their feet through no fault of theirs," he said.

"I think SIA value-adds to the economy and contributes to Singapore's role as a transport hub... It is a national icon that must be protected and must be helped."

Alan Tan, president of the Singapore Airlines Staff Union, noted that unlike some other carriers that have retrenched cabin crew, SIA has managed to hang on to its crew so far.

"We will work with the company to continue to do what we can, but given how badly the global air travel industry is doing, it will honestly take a miracle for us to keep all of them indefinitely," he said. - The Straits Times/Asia News Network

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