Airlines embark on pay cut route to stay afloat

  • Aviation
  • Wednesday, 11 Mar 2020

Malindo Air was the first to announce pay cuts last Friday followed by Malaysia Airlines and AirAsia Group on Monday.

PETALING JAYA: Three local airlines are implementing pay cuts for some of their employees effective this month as they grapple to manage cost amid plunging demand brought about by the coronavirus disease (Covid-19).

Malindo Air was the first to announce pay cuts last Friday followed by Malaysia Airlines and AirAsia Group on Monday.

AirAsia Group acting CEO and president (airlines) Bo Lingam told StarBiz that the pay cuts “only involved the senior management.’’

The cuts are said to be about 10%, but Bo declined to elaborate.

On Monday, Bo told employees that AirAsia was affected just like any other airlines and had to cancel many flights due to poor demand not only to China but to other destinations.

The airline had to find bold ways to reduce cost, conserve funds and protect the future of the business.

However, he assured the employees that the cost containment measures would have zero or minimal impact on most AirAsia employees especially those in the lower income bracket.

Also on Monday, Malaysia Airlines CEO captain Izham Ismail, in a video message to the airline’s 13,000 employees, said it would cut senior management’s salaries by 10% starting this month and they would no longer receive allowances.

He warned of more cost-cutting measures. Izham said, in the first quarter of this year, the airline had removed 7.1% of its flight capacity and cancelled more than 1,600 flights and that number was increasing.

Malindo Air has taken a more drastic approach with its CEO captain Mushafiz Mustafa Bakri telling employees in a memo last Friday to brace for up to a 50% pay cut for the next few months until normalcy returns.

Employees were asked to reduce the number of working days by up to 15 a month.

The three local airlines join several global players that have opted for pay cuts to reduce cost. Global airlines have suffered huge capacity cuts since the outbreak of the virus with demand for air travel plunging on fears as Covid-19 spread.

Companies are asking employees not to travel and communicate via conference calls to avoid taking risks.

Last year, the International Air Transport Association (IATA) predicted that total employment by airlines would have reached 2.95 million this year but with the outbreak, there could be a shortfall since airlines have frozen hiring since the outbreak.

Aside from pay cuts, airlines can’t seem to stop flying empty planes. Known as “ghost flights”, airlines would do this to protect their converted take-off and landing slots at major airports.

If they do not operate the flights, they risk the slots being forfeited. Flying them means they are losing a lot of money without carrying any passengers.

However, as a report pointed out, if the airlines don’t fly, a competitor may take up the slot and to get back the same slot in a major airport would be a challenge.

According to a report, IATA is hoping regulators will suspend the rule at least until September so that airlines can respond to market conditions with appropriate capacity levels to avoid any need to run empty services in order to maintain slots.

MIDF Research yesterday downgraded the local aviation sector to “neutral’’ from previous “positive” because of Covid-19 and travel demand.

Among other airlines that have instituted pay cuts is Australia’s Qantas. Its CEO Alan Joyce will take no salary for the rest of the financial year like his peers and the board chairman. Other executives and board members at Qantas will take a 30% pay cut.

Virgin Atlantic CEO took a 20% pay cut for four months and his executive leadership team a cut of 15%.

Singapore Airlines’ CEO took a 15% pay cut, executive vice-presidents (12%), divisional vice-presidents (7%) and senior managers/managers (5%).

Cathay Pacific has asked all of its 33,000 employees to voluntarily sign up for three weeks unpaid leave sometime before the end of June and Emirates has also urged employees to take leave of absence.

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