Singapore Air Cuts 20% of Workforce as Virus Smashes Travel

A Singapore Airlines passenger jet taxis along the tarmac as it arrives at Changi International

A Singapore Airlines passenger jet taxis along the tarmac as it arrives at Changi International Airport terminal in Singapore on June 8.

Photographer: Roslan Rahman/AFP via Getty Images

Follow Bloomberg on Telegram for all the investment news and analysis you need.

Singapore Airlines Ltd. is eliminating about 4,300 jobs, or 20% of its workforce, as the coronavirus outbreak devastates the aviation industry.

The cuts will be made at Singapore Airlines and its SilkAir and Scoot units. Discussions are underway with unions and arrangements will be finalized as soon as possible, the carrier said in a statement late Thursday.

The job losses are the first at Singapore Airlines since the SARS outbreak in 2003.

Boeing Max Grounding to Cause Significant Costs at Singapore Air

Photographer: Ore Huiying/Bloomberg

“Having to let go of our valuable and dedicated people is the hardest and most agonizing decision that I have had to make in my 30 years with SIA,” Chief Executive Officer Goh Choon Phong said. “The next few weeks will be some of the toughest in the history of the SIA Group.”

The decision shows that even the world’s top carriers can’t evade the biggest financial crisis in the industry’s history after the pandemic eviscerated air travel. The International Air Transport Association doesn’t expect passenger traffic to recover to pre-pandemic levels until 2024. Singapore Airlines is particularly vulnerable because it has no domestic market to fall back on.

The carrier’s shares were little changed Friday following a 1.1% loss Thursday. They are down 45% this year.

Who Will Survive?

“When the battle against Covid-19 began, none of us could have predicted its devastating impact on the entire aviation industry,” Goh said. “Eight months on, the number of carriers that have collapsed continues to rise. It is still not clear who will ultimately survive this crisis.”

The job losses come despite the airline raising about S$11 billion ($8 billion) through loans and a rights issue in June, and receiving aid from a government job-support program. The Ministry of Finance said it spent about S$15 billion as of July to help companies in the city-state pay staff.

Unlike many of its peers, Singapore Airlines initially managed to resist job cuts, though some staff were redeployed to work in hospitals, social services and on Singapore’s transport network.

Hiring Freeze

It also imposed a hiring freeze in March and offered early retirement and voluntary redundancies that eliminated some 1,900 positions. As a result, the potential cuts across the group have been reduced to about 2,400, the airline said Thursday.

Singapore Airlines and SilkAir are only operating at about 7% of pre-pandemic capacity, and while some routes are reopening, the level is likely to be just 11% by the end of November, it has said.

The job cuts could initially save the airline S$13 million a month until March, when the government’s job support program is due to end, and almost S$20 million after, according to James Teo, an analyst with Bloomberg Intelligence in Singapore.

“I think these cuts are overdue and the delay was likely due to the time taken to finalize voluntary departures,” Teo said.

The carrier suffered a record S$1 billion operating loss in the first quarter through June, with revenue passenger kilometers plunging more than 99%. The virus woes are exacerbated by fuel-hedging losses, with as much as 79% of its needs locked in at $71-$74 a barrel for jet fuel and $58-$62 for Brent, Teo wrote earlier Thursday, before the job-cuts announcement.

Global Pain

Few in the aviation industry have been spared by the coronavirus, with the likes of British Airways, Deutsche Lufthansa AG, Emirates and Qantas Airways Ltd. announcing thousands of dismissals and unpaid leave programs. Many more are expected in the U.S. after a moratorium on job cuts — one condition of a $50 billion government bailout — is lifted at the end of September.

Elsewhere in Asia, Cathay Pacific Airways Ltd. and its Cathay Dragon unit won’t apply for a Hong Kong government job-support program, Andy Wong, the airline’s general manager for corporate affairs, said in a statement Friday, confirming a report in the South China Morning Post. That frees Cathay from the requirement to retain workers in exchange for the support. The carrier is due to finalize a strategic review of its business by the fourth quarter.

Cathay is applying for government support for some of its subsidiaries, however, including low-cost carrier Hong Kong Express, cargo unit Air Hong Kong Ltd. and Cathay Pacific Catering Services Ltd., Wong said.

“We need to adapt our airlines to this new reality,” he said. “It is inevitable we will need to right-size our airlines to address the reduced travel market.”

Since January, airlines globally have flagged that as many as 400,000 people will either be let go or furloughed, according to data compiled by Bloomberg. In North America alone, some 130,000 jobs are expected to be lost. United Airlines Holdings Inc. said last week it will eliminate 16,370 jobs in October as it shrinks operations, adding to the 19,000 staff cuts planned by American Airlines Group Inc.

Singapore Airlines is reviewing its fleet size and network. In July, it agreed with Airbus SE to defer deliveries of some aircraft and reschedule some payments, while it is in similar talks with Boeing Co.

— With assistance by Anurag Kotoky, and Kyunghee Park

(Adds Cathay’s response on government job-support program.)

Source Article