News Update: Emirates reverses decision to suspend all passenger flights

Courtesy AFP

Emirates Airlines reversed an earlier decision to suspend all passenger flights, which was supposed to take effect from March 25.

The Gulf carrier said it had “received requests from government and customers to support the repatriation of travellers.”

It will continue to fly to Australia, Canada, Hong Kong, Japan, Malaysia, the Philippines, Singapore, South Africa, South Korea, Switzerland, Thailand, the United Kingdom and the United States. This is greatly reduced from its usual 159 destinations.

Singapore Airlines has announced it will cut capacity by 96 per cent to end April, previously planned at 50 per cent.

Jetstar Asia will be grounding its entire fleet from March 23 to April 15.

Quick changes across the globe are expected, demonstrating the uncertainty that is gripping the industry.

Emirates suspends all passenger flights: Will the global industry grind to a standstill?

Courtesy Reuters

Emirates Airlines becomes the first carrier to announce complete suspension of all passenger flights. This will take effect on Wednesday, March 25 when its entire passenger fleet will be grounded. The airline has already cut back capacity by 70 per cent.

It is not just that more people are refraining from travel for fear of contracting the coronavirus, more countries are beginning to ban travel by foreigners into their ports. Consequently airlines are flying empty seats. And especially for airlines which rely on transiting and connecting traffic such as Emirates, this takes a heavy toll on their business.

Emirates chairman Sheikh Ahmed bin Saeed al-Maktoum said: “As a global network airline, we find ourselves in a situation where we cannot viably operate passenger services until countries reopen their borders and travel confidence returns.”

Is this a sign of more airlines following suit, notwithstanding those which are already teetering on the line facing bankruptcy?

Other major carriers which rely heavily on similar traffic as Emirates include Singapore Airlines (SIA) and Cathay Pacific.

SIA has reduced capacity by 50 per cent to the end of April. Further reduction is not off the table. The airline attributed this to “the growing scale of border controls”. SIA CEO Goh Choon Phong said: “We have lost a large amount of our traffic in a very short time, and it will not be viable for us to maintain our current network.”

Cathay too has made deep capacity cuts, particularly to mainland China as high as 90 per cent.

For the premium Hong Kong carrier, it is a double whammy as it moves from an embattled 2019 into an uncertain 2020. Profits plummeted in 2019 caused by the political unrest in the latter half of the year. The full year profit was HK$1.7 billion (US$220 million), down by 26 per cent from HK$2.3 billion in 2018.

Looking ahead, the airline said in a statement that “the outbreak of COVID-19 since January 2020 has resulted in a challenging operational environment, and will adversely impact the Group’s financial performance and liquidity position.” Cathay chairman Patrick Healy added, “We expect to incur a substantial loss for the first half of 2020.”

While some carriers may fall by the wayside, it is however unthinkable that the global airline industry will grant to a halt. Some governments are already promising reliefs to help them pull through. Nobody can say for sure when normalcy will return while acknowledging it is anything but foreseeable.

Some airlines may not survive Covid-19

Anxiety is gripping the airline industry, the concern that some airlines may not survive Covid-19.

Particularly vulnerable are airlines laden with debt and are already struggling to stay afloat as well as small carriers which rely on seasonal traffic.

The dip in oil prices cannot make up for the drastic fall in demand for seats as people refrain from flying and as more countries impose travel restrictions and close their borders.

According to the International Air Transport Association (IATA), global airline revenue losses would rise above US113bn following the announcement of restrictions on travel from Europe into the United States.

Poland for one is suspending all international flights, and many other European countries are expected to take similar action to reduce travel.

Cathay Pacific has warned of financial losses ahead because of the coronavirus outbreak, adding to its woes of plunging profits in 2019 resulting from political unrest in Hong Kong.

Courtesy Getty Images

Korean Air has already sounded the alarm. The airline’s president Woo Kee-hong said: “If the situation continues for a longer period, we may reach the threshold where we cannot guarantee the company’s survival.”

Like many other airlines, Korean Air has suspended flights – as much as 80 per cent – and is asking staff to take voluntary leave. Ryanair may force staff to take unpaid leave.

Norwegian Air Shuttle CEO Jacob Schram said the airline has started talking to the unions about “temporary layoffs for flying crew members as well as employees on the ground in the offices.”

British Airways (BA) too is not ruling out cutting jobs. BA chief Alex Cruz said: “We can no longer sustain our current level of employment and jobs would be lost – perhaps for a short term, perhaps longer term.”

Uncertainty is the word. And that makes it all the more onerous for some airlines not knowing for how much longer they can afford keep their planes on the ground.

B737 Max compliance: FAA lives up to its role as overseer

Courtesy Getty Images

Having been criticized for oversight laxity, the Federal Aviation Administration (FAA) is re-asserting its authority and not taking any chances as far as safety is concerned.

It is surprising that Boeing should propose no modification to the B737 Max’s wiring bundles except for the new planes awaiting delivery. This has been rejected by the FAA.

While Boeing sees no safety threat since the planes in use before the grounding had not experienced any hiccup concerning the wiring, the FAA together with the European Union Aviation Safety Agency have identified it as a potential problem.

According to the FAA, a short circuit in the wiring bundles could lead to pilots losing control of the plane.

It will be hard to restore customer’s confidence if Boeing continues to sidestep issues identified as potentially problematic, no matter how remote that possibility might be.

Indeed, isn’t there a lesson to be learned from the Lion Air and Ethiopian Airlines crashes in October 2018 and March 2019 respectively?

The FAA is making it clear that the Max jet “will be cleared for return to passenger service only after the FAA is satisfied that all safety-related issues are addressed.”

Indications are that if all goes according to plans, the Max will be back in service in mid-year.

However, with the Covid-19 outbreak that has led to many airlines drastically cutting capacity, there is less of an urgency for now.

How Covid-19 is changing the way we fly

https://www.todayonline.com/commentary/how-covid-19-way-we-fly-airline-SIA-Scoot-airport-travel

A bleak year for airlines

It looks quite certainly a bleak year for airlines as Covid-19 keeps people away from travelling. The outbreak has become more extensive than anticipated, short of being classified as pandemic by the World Health Organization.

Cutting capacity

Many airlines are cutting back or suspending services not only to destinations in China where the outbreak started but also across the world.

Among them are:

Courtesy Singapore Airlines

Singapore Airlines, which has cancelled almost 700 flights across its network through to May. Its low-cost subsidiary Scoot has cancelled all flights to China.

Cathay Pacific, which so far has seen flights reduced by more than 75 per cent till the end of March, with hints of more to be scrapped.

Qantas, which has reduced capacity to Hong Kong and suspended flights to Shanghai and Beijing. It is also reporting weak demand for seats on flights to Singapore and Japan as well. Capacity to Asian destinations will be reduced by 15 per cent until the end of May. Its low-cost subsidiary Jetstar is also adjusting capacity as a result of the weaker domestic market.

Air France, which has taken out flights to China until the end of March.

British Airways, which has cancelled not only flights to China but also more than 200 flights from London to destinations in the United States, Italy, France, Austria, Belgium, Germany and Ireland in the latter half of March.

Ryanair, which will cut up to 25% of flights in and out of Italy from 17 March to 8 April..Ryanair chief Michael O’Leary said: “There has been a notable drop in forward bookings towards the end of March, into early April.”

EasyJet, which is cancelling some flights because of “a significant softening of demand and load factors into and out of our Northern Italian bases”.

United Airlines, which has suspended flights to China and axed flights to South Korea, Japan and Singapore as demand across the Pacific has fallen by as much as 75 per cent. Delta Air Lines has also cancelled flights to China.

Air Canada, which has cancelled all flights from Toronto to Hong Kong until the end of April.

Middle-east airlines, which are affected by action taken by the Gulf authorities. Iran as the epicentre of the outbreak in the region has seen flights to its airports cancelled by neighbouring United Arab Emirates (UAE), Bahrain, Oman, Jordan, Kuwait, Iraq and Saudi Arabia.

Events cancelled

The threat of the disease spreading easily at public events has led to many of them being cancelled, which in turn will affect the airlines which would have enjoyed a boon in carriage numbers.

Courtesy United Airlines

United Airlines for one has scaled back additional flights between San Francisco/Newark and Barcelona planned for the Mobile World Congress which has been cancelled.

Now all eyes are on the 2020 Summer Olympics to be staged in Tokyo.

Business travel, as noted by British Airways chief Willie Walsh, has been affected by the cancellation of large conferences. Some large corporations are also restricting executive travel.

International cruises, which pose a similar threat following the outbreak of the disease on the Diamond Princess docked at Yokohama, have also suffered from reduced patronage or cancellations, and this in turn reduces feeds from airlines from across the globe to the ports of call.

Reduced profitability

Expectedly airlines are predicting reduced profitability although some of them are optimistic about the impact as not being as drastic as it seems.

Air France-KLM warned its earnings would be affected by as much as €200 million (US$224 million).

Qantas said the COVID-19 outbreak would cost the airline up to A$150m (US$99m).

Air New Zealand expects the impact to be in the range from NZ$35 million (US$22 million) to NZ$75 million as travel demand to Asia drops.

Finnair is expecting a significant drop in operating profit this year.

Airlines which rely heavily on Asian traffic are naturally more affected, even more so budget carriers such as AirAsia and its long-haul arm AirAsiaX. Particularly vulnerable are airlines which are struggling to stay afloat, such as Norwegian Air Shuttle, which is cutting back on long-haul operations, and Hong Kong Airlines, which is 45 per cent owned by Hainan Airlines of the HNA Group, which itself is facing a sell-off by the Chinese government.

Cost cutting

Besides reducing or cutting capacity, expectedly many airlines are looking at cutting cost.

EasyJet is looking into reducing administrative budgets, offering unpaid leave, and freezing recruitment, promotion and pay rises.

Singapore Airlines is implementing paycuts of 10 to 15 per cent for senior executive management. General staff will be offered a voluntary no-pay leave scheme.

Cathay Pacific is asking employees to take unpaid leave.

Courtesy Airbus

Perhaps the impact is most felt at Hong Kong Airlines which has slashed in-flight services to a bare minimum and dismissed staff, targeting 400 of them.

What’s next?

While the industry contnues to grapple with the prolonged saga of the B737 Max jet predicament, the coronavirus outbreak could not have come at a worse time on its heels. In both cases, it is the uncertainty that poses the biggest problem. Soem airlines are pessimistic that the threat will blow over by the end of March, which is unlikely, while others are more cautious in their forecast, looking at the end of May. It is this uncertainty that makes one wonder if any of them might not survive the wait.

Singapore Airlines’ third quarter performance: Silver lining before the clouds darken

Courtesy Singapore Airlines

Singapore Airliners (SIA)’s double-digit profit growth for the third quarter (October to December 2019) is a silver lining before the clouds darken.

SIA posted a 3Q operating profit of S$413 million (US$297 million) – S$44 million or 12 per cent more than the same quarter a year ago. This gives a 9-month total of S$878 million which is 13 per cent short of the full FY 2018/19 profit of S$991 million Of that, 4Q contributed 21 per cent.

The question is whether SIA can match last year’s performance in the current situation with the dip in global travel because of COVID-19.

SIA has cancelled almost 700 flights to destinations not only in Asia but also in the United States, Europe, Australia and New Zealand, and Africa and West Asia. Some flights are suspended from February with others taking effect in the months following until May.

The full impact of the cancellations will not be felt in FY2019/20 which nevertheless will be impacted by present and continuing dip in demand.

In particular, China is a large market for SIA and its low-cost subsidiary Scoot, which has cancelled all flights to China. SilkAir which will in time be merged with the parent airline has also drastically reduced its services to China.

SilkAir’s 3Q performance was flat, posting an operating profit of S$7 million. The airline’s capacity has been impacted by the grounding of the B737 Max jet.

Scoot posted an operating profit of S$4 million for 3Q 2019/20. In light of its reliance on the China business, it is not likely to fare any better in the last quarter.

Of course, SIA is not alone in this unfortunate situation. Other airlines such as Cathay Pacific, Malaysia Airlines and Royal Brunei Airlines have also cut back services to cope with reduced demand. In the case of Cathay, capacity has been reduced by as much as 40 per cent.

It is during times like this that confidence is most needed. SIA is optimistic that the airline is “well-positioned to weather current challenges posed by COVID-19 outbreak” according to its statement released on February 14.