Murky path towards post-pandemic recovery for aviation industry

The Thai Airways pilot has not received any flying allowance at all, while his basic salary was cut as the company suffered billions of losses.

BANGKOK: It has been more than a year since Captain Dejphon Poolpun last took to the skies.

The Thai Airways pilot has not received any flying allowance at all, while his basic salary was cut as the company suffered billions of losses.

The hiatus in flying has meant a complete change in his lifestyle. These days, he spends much of his time in the kitchen of his Bangkok home, where he bakes tray after tray of brownies for his online shop Flying Sweets. The business has found a sizable group of loyal customers.

“In the past year I made more than US$3,000 (RM12,384) a month, ” he told CNA.

“In one day, I could sell 300 brownies when the business was booming.”

Due to the pandemic, he lost 60% of his salary as a pilot.

Captain Dejphon’s circumstances are not unique for those in the aviation industry. Across the region, many pilots and flight attendants have been laid off, while others are forced to take substantial pay cuts. Many had to supplement their income by selling food or other goods.

While Captain Dejphon is one of the success stories of how airline employees were able to adapt to the sudden downturn, there are those who had to sell their houses and cars to pay off their debts.

Meanwhile, airlines continue to suffer losses, forcing companies to downsize their fleet and employees and make drastic changes to their business strategies.

Thai Airways, for example, had to file a business reorganisation petition to the country’s Central Bankruptcy Court.

Meanwhile, others like Malaysia Airlines and Garuda Indonesia have been engaged in negotiation processes with airplane leasing firms and creditors to restructure their loans.

For some, there might be light at the end of the tunnel. Buoyed by the strong domestic market, Garuda Indonesia has said that it might be on its way to make a profit this year while pilots working for the airline said that their workload and salaries are slowly returning to normal.

Meanwhile, Thailand is hoping to gradually reopen some parts of the country to foreign visitors in a bid to kickstart its tourism industry, one of the country’s main economic sectors.But the path to recovery is still murky, said industry players and analysts interviewed by CNA.

A new wave of Covid-19 infections could force governments to bring back travel restrictions, reduce customer confidence and derail plans to revive tourism.

The pandemic has caused a massive drop in the number of passengers worldwide and carriers from the region have not been spared.In 2019, Garuda carried more than 15 million passengers. Last year, the figure fell to 2.8 million. As a result, the company recorded a net loss of US$1.07bil (RM4.42bil).

It was a devastating blow for the Indonesian flag carrier, which in 2019 reaped a profit of US$122.4mil (RM505.27mil).

Because of the pandemic, Garuda decided to lay off 700 permanent employees and contract workers while 15,000 others were forced to take a pay cut of up to 50%. Garuda also liquidated six of its subsidiaries in a bid to streamline the company.

“The ongoing pandemic had compelled the company to create a number of adjustments, ” Garuda CEO Irfan Setiaputra said in a statement on May 21. “We have to take these steps to survive in this uncertain time.”

In lieu of a bailout, the Indonesian government agreed to purchase US$600mil (RM2.47bil) in newly issued bonds in November 2020, injecting fresh capital to the ailing company. At the time, Garuda already had negative net working capital and had liabilities exceeding 80% of its assets.

Thai Airways encountered even bigger losses. Although the company managed to carry 5.87 million passengers last year, the figure was a 76% drop from 2019. The dramatic loss in passengers was one of the reasons why Thai Airways recorded a net loss of US$4.5bil (RM18.58bil).

The pandemic-induced financial woes forced Thai Airways to file a business reorganisation petition to the Central Bankruptcy Court in May last year. In its petition, the flag carrier declared its debt to be worth more than US$11.3bil (RM46.65bil), as of March 31, which exceeded its assets. — Borneo Bulletin/ANN

Since the submission, the airline has implemented various measures to cut costs and increase revenue. These include downsizing headcount from 29,000 to between 14,000 and 15,000, reducing the number of aircraft in its fleet and asking employees to take leave without pay.

Meanwhile, according to the company’s financial statements, Thai Airways only had US$278mil (RM1.14bil) in cash and cash equivalents at the end of 2020, compared to US$695mil (RM2.86bil) the year before.

Bangkok-based aviation analyst Suwat Wattanapornprom of Asia Plus Securities said Thai Airways’ cash on hand might only be enough to last the company until early 2022. This, he said, could lead to a liquidity issue once the country decides to reopen international 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 told CNA. - Borneo Bulletin

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