Coronavirus likely to trigger layoffs, capacity cuts across global airlines

Major global airlines projected layoffs, furloughs and capacity cuts over the next few months, with Air New Zealand on Tuesday warning it expected staffing levels to be 30 per cent lower than it is now, due to the coronavirus pandemic.

Airlines have been rushing to shore up liquidity, reduce capital expenditure and cut costs to stay afloat amid the worst crisis to hit the global aviation industry.

Data firm OAG said the aviation industry was less than half the size it was in mid-January due to the rapid capacity cuts implemented by airlines around the world. Around 40 per cent of the world’s passenger jet fleet is now in storage, according to data from aviation firm Cirium.

Air New Zealand said it will lay off about 3,500 employees, nearly a third of its workforce, in the coming months, as the outbreak forced it to cancel nearly all flights.

The virus “has seen us go from having revenue of $5.8 billion to what is shaping up to be less than $500 million annually,” Chief Executive Officer Greg Foran told staff in an email. “We expect that even in a year’s time we will be at least 30 per cent smaller than we are today.”

New Zealand’s national carrier, which employs 12,500 people, warned the layoffs estimate was a conservative assumption and the numbers could rise if the domestic lockdown and border restrictions were extended.

Air Canada will cut second-quarter capacity by 85-90 per cent, place about 15,200 unionized employees off duty and furlough about 1,300 managers, beginning on or about April 3.

Canada’s largest airline said it is drawing down about C$1 billion ($706 million) in credit to bolster liquidity, while senior executives will forgo between 25-50 per cent of their salary and board members agreed to a 25 per cent cut.

Low-cost US carrier Spirit Airlines Inc is cancelling all flights to and from the New York region after U.S. officials warned against travel to the area because of the pandemic.

On Monday, Germany’s Lufthansa said 27,000 of its staff would reduce hours, Britain’s EasyJet PLC said it would lay off 4,000 UK-based cabin crew for two months, and low-cost carrier flydubai said it would reduce staff pay for three months.

US airlines have been pushing the Treasury to release up to $58 billion in government grants and loans and had threatened to quickly start laying off tens of thousands of workers within days if they did not get a bailout.

The $2.2 trillion stimulus and assistance legislation signed into law last week by President Donald Trump gives passenger airlines $25 billion in cash assistance to cover payroll costs and $25 billion in loans, while cargo carriers are eligible for $4 billion in grants and $4 billion in loans.

Treasury said airlines should apply for grants by April 3.

American Airlines Holdings Inc intends to apply for up to $12 billion government aid, ensuring no involuntary layoffs or pay cuts in the next six months, executives said in a memo to employees.

“We certainly hope and expect that by that time, the virus will be contained, Americans will be flying again and we will be back to flying a full schedule,” Chief Executive Doug Parker and President Robert Isom said in the memo.

In Australia, Virgin Australia Holdings Ltd said it was seeking a possible government loan of A$1.4 billion ($864 million) which could convert to equity under certain circumstances to help it weather the coronavirus crisis.

Virgin’s shares are tightly controlled by foreign airlines including Singapore Airlines Ltd, Etihad Airways and Chinese conglomerate HNA Group that have also seen a sharp deterioration in revenues.

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