Airport chaos: Why only in the West?

Courtesy EPA

It’s a mess, a big mess. That about sums up the state of travel at a number of major airports in the Untied States, Canada and Europe.

Long lines for both arriving and departing passengers, an unprecedented high number of flight delays and cancellations, and missing luggage.

After two years of the COVID-19 pandemic during which thousands of staff have been laid off, now both airports and airlines are facing recruitment problems to beef up their numbers to cope with the surge in demand for travel as the rules restricting travel are being relaxed.

Not helping, both parties are blaming each other for the mess.

Some airports including London Heathrow and Amsterdam Schiphol Airport are imposing a cap on the number of passengers that they can handle each day. Heathrow limits it 100,000 passengers a day and Schiphol to 60,000.

This has drawn criticism from the airlines, which call the ruling unreasonable and unacceptable.

Emirates Airlines for one has said they will not comply with Heathrow’s ruling, seeing no reason why they should suffer for the inefficiency of the airport when they “are fully ready and capable of handling our flights.” The Middle-East airline said “the crux of the issue lies with the central services and systems which are the responsibility of the airport operator.”

Director general of the International Air Transport Association (IATA) Willie Walsh called it “a ridiculous thing” for an airport to say to an airline to stop selling seats. H added: “I am surprised Heathrow have not been able to get their act together better than this. Airlines have been predicting stronger traffic than Heathrow has been predicting… they clearly got it completely wrong.”

Heathrow countered that the airlines have not prepared early enough for the surge in travel and that they are not prepared to pay the going rate for hire. More than half the ground handlers in Europe have left the workforce.

In Canada, some people are blaming the cumbersome COVID checks procedures at security as one of the reasons for the long lines, allegedly up to four hours in an extreme case. The airlines are encouraging passengers to report at the airport, but the authorities say this only exacerbates the problem of congestion.

American Airlines has cancelled 1,175 flights in July and August to allow “buffer” in its schedule to minimize disruptions. It is not alone. United Airlines is reducing flights for the remainder of the year to similarly “create more buffer into the system” to stay resilient, according to its CEO Scott Kirby. Delta Air has also cut back flights.

In the end, the passengers are the ones to suffer, having their travel plans disrupted. Many of them have been left stranded when their flight delays are cancelled, missed their connections and arrived without their checked luggage.

A curious question to ask is why the chaos is happening in North America and Europe but not

elsewhere in the world? Perhaps, not as yet as IATA warns that there are signs that Australia may be next.

Perhaps it is the good fortune of these other regions that the surge in travel rebound is not as robust. They can therefore learn from the North American and European experiences.

But it speaks a lot about being prepared, which is puzzling how the operators in the west seem not to be. To make matters worse, particularly in Europe, they are prone to crew and ground staff going on strike in the summer months because it is when it hurts most.

Biting off more than one can chew has its undesirable consequences.

The good and bad news on the road to recovery

Courtesy EPA

The good news is that airlines are on the road to recovery faster than expected. And the bad news, many of them are not prepared for it.

North America, which is leading in the recovery, is afflicted with massive flight delays. American Airlines, United Airlines and Southwest Airlines passengers are among the worst hit.

A major problem is a shortage of pilots which resulted in hundreds of planes being grounded.

Travellers in Canada too are facing long lines at the airport due to reduced staffing.

Over in the Untied Kingdom, thousands of travellers are either denied their holiday abroad or stuck overseas after the cancellation of their flights. Passengers booked with British Airways, easyjet, Tui Airways and Wizz Air are among those affected.

How did it get to be so bad?

UK Transport Secretary Grant Shapps put it simply that too many jobs had been cut and airlines had “seriously oversold flights and holidays”.

UK airlines cut about 30,000 jobs, almost half the number employed in 2019. Thousands of other airport support staff had also been let go.

Yet this was only to be expected at the height of the pandemic. It made economic sense then. The present problem is exacerbated by staff forced into early retirement during the pandemic and others who have sought alternative employment elsewhere and prefer not to return to the industry.

True, airlines are biting off more than they can chew. They can do better. They in turn blame the authorities for not doing enough to support them. There are issues of long employment vetting and training of new staff. Unions think not enough consideration is given to pay and work conditions.

The situation has developed into a blaming match. What is needed now is for all parties to work together and think of the customers who invariably end up being the worst off through no fault of theirs.

Not world class, five-star is still a winner

Not world class but five-star as named by the Airline Passenger Experience Association (APEX). The distinction may not raise too many brows. Five stars are as far as you can go by definition in the universal ranking of service excellence.

Only 23 airlines made it to the APEX five-star list which of course includes the magnificent seven also named by the orgnisation. (See APEX names world cass airlines, none from North America, Dec 13, 2021). Asia tops the list with seven airlines, followed by Europe (six), Middle East (five), North America (four) and Latin America (one).

According to APEX, the result was based on passenger surveys collected over nearly one million flights operated by 600 carriers worldwide.

Courtesy Boeing

Asian carriers are the familiar brands of Cathay Pacific, China Airlines, EVA Air, Japan Airlines, Korean Air and Singapore Airlines with the notable absence of All Nippon Airways (ANA). The seventh carrier in the list is the comparatively new Xiamen Airlines which outperformed the larger three competitors o Air China, China Eastern Airlines and China Southern Airlines. Hainan Airlines is another notable omission.

Courtesy Getty Images

No surprise either of the winning Gulf carriers, namely Emirates, Etihad Airways and Qatar Airways. Joining them are El Al and Saudi Arabian Airlines (Saudia).

Courtesy Turkish Airlines

The European list of five-star winners is made up of Aeroflot, KLM Dutch Airlines, Lufthansa, Swiss International Air Lines, Turkish Airlines and Virgin Atlantic. One may note the absence of aAir France and British Airways.

Courtesy Getty Images

While none of the world class airlines in the Apex list came from North America, four of them made the five-star grade, namely Air Canada, American Airlines, Delta Air Lines and United Airlines.

Courtesy Boeing

Outside these regions, only Aeromexico from Latin America made the cut.

Once again, neither Qantas nor Air New Zealand in Sputhwest Pacific achieved any mention.

If there is one key to winning, it is one of consistency. According to APEX, the winning airlines require “the vast majority of their independently verified customer ratings to be five-star.” As an example, APEX says it “requires four times the number of five-star votes to counteract a single one-star vote. This provides tremendous power to customers when they are disappointed by their customer exoerience.”

At a time when many airlines are hard-hit by the coronavirus pandemic as they struggle to stay afloat, cutting back on frills, it is a challenge to maintain service standards and meet, let alone exceed, cusotmer expectations. Theefore, to be five-star recognized is no mean feat.

Cathay Pacific takes a tough COVID line

Courtesy Cathay Pacific

Cathay Pacific has one of the world’s most stringent COVID-19 regimes for its crew in line with the territory’s zero-infection goal.

Pilots flying passengers inbound from “high-risk” places such as Britain and the Untied States are placed on hotel quarantine for 14 days. Three pilots who were infected with the Covid virus were fired for breaching company rules when they left their hotel during a layover in Frankfurt, resulting in more than 270 people in contact with them being quarantined in a government camp for 21 days.

The Cathay crews are rostered on a “closed-loop” system, whereby they work for three weeks during which they stay briefly in Hong Kong in a designated hotel before a two-week quarantine on their final return. While this is on a voluntary basis, the take-up rate is said to be low such that Cathay is cutting passenger flights and converting some into cargo flights. This could not have come at a worse time ahead of the festive season. Staff morale is also said to be low and crew resignation rising.

While apologising for the several flight cancellations, a Cathay spokesperson said, “As the home carrier of Hong Kong, we are fully committed to protecting and enhancing Hong Kong’s aviation hub status and to keeping the flow of people and cargo between Hong Kong and the rest of the world moving despite the challenging circumstances presented by the pandemic.”

That may baffle a number of people who think that the territory’s harsh policy has damaged Hong Kong’s business status, helping neither Cathay Pacific nor Hong Kong International Airport.

FedEx has decided to shift its crew base out of Hong Kong, saying it would “allow us to continue to staff our Hong Kong and Asia flights without being subject to Hong Kong entry restrictions.”

British Airways has suspended its flights to Hong Kong to avoid the risk of any more of its crews being sent to a government camp after one of them tested positive for the virus resulting in the entire team being quarantined. Other airlines including Emirates and KLM operate flights to Hong Kong via Bangkok so that their crews do not disembark in Hong Kong.

One is apt to compare the fortune of Cathay with rival Singapore Airlines whose traffic has picked up as Singapore decides to live with the virus in a world that has begun to open up. Both airlines are dependent on international traffic, which explains how Singapore is actively negotiating “vaccinated travel lane” arrangements with other countries to allow quarantine-free travel.

But with the threat of a new variant, Omicron, this may set back the progress. In the looming uncertainty, Cathay may not be that worse off. Access to the large Chinese mainland domestic market without the restrictions may be a better bargain.

Cathay’s chief customer and commercial officer Ronald Lam said, “We do hope that sometime in 2022 the Chinese mainland government and Honbg Kong government may consider opening up.”

Although the full-year result will see a substantial loss, Cathay is expecting a considerably improved second half.

Opportunities in Hard Times

IT seems paradoxical that while the Covid-19 pandemic has dealt a devastating blow to the airline industry with some airlines folding their wings and many others reporting dives in passenger numbers higher than 95 per cent, new airlines are entering the arena.

Even in hard times, there are opportunities. Continuing border restrictions are giving domestic travel a boost. Further easing of regulations within areas of close geographical proximity is also favouring short-haul regional travel over long-haul international travel.

Ryanair chief executive Michael O’Leary is expecting a “very strong recovery” for the short-haul in Europe. The airline predicts a return to pre-pandemic levels in capacity on the back of 10.5 million passengers a month over the next three months.

To be expected, British Airways (BA) is not going to step aside and watch the market shift to the likes of Ryanair and easyJet. The British national carrier is said to be in the final stages of planning a lower-cost subsidiary airline at Gatwick Airport. Note the reference to “lower cost” rather than “low cost”.

A BA statement said, “This will help us to be both agile and competitive, allowing us to build a sustainable short-haul presence at Gatwick over time.”

There are several factors that favour the unexpected trend.

Planes are cheaper. Gates are easier to come by. As leading airlines shed staff to cope with the downturn in business, new startups can pick up experienced staff to jump start their operations. All these point to lower start-up costs which deter entry in good times when leading airlines by sheer size and economy of scale maintain an edge over their challengers.

As executive chairman Steven Udvar–Házy of Air Lease Corporation summed it all up so pointedly, “cheap money… cheap aircraft, and pilots”.

A major contributor is the pent-up demand for travel as restrictions ease.

And, of course, for the adventurous and entrepreneurial with dreams to pursue, it is hard to resist the temptation. Andrew Levy of Avelo Airlines and David Neeleman of Breeze Airways are two examples.

Courtesy Avelo Airlines

Avelo which operates out of Burbank Airport in Los Angeles aims to provide not only cheaper fares but also a higher degree of convenience for commuting, serving secondary airports on the West Coast of the United States. Similarly, Breeze is focusing on point-to-point routes “that bigger airlines overlook.” It is offering “low fare, high quality non-stop flights.”

Courtesy Breeze Airways

In Canada, low-cost carriers Flair Airlines and Swoop are expanding their reach and eyeing markets south of the border in the US. OWG Airlines which was founded in 2020 in Montreal is serving travellers between Canada and Cuba. Another Canadian startup in the works is Connect Airlines which plans to commence operations in October, connecting Toronto’s Billy Bishop City Airport with airports in the Northeast and Midwest of the US. The airline is said to be in partnership with American Airlines.

UK’s FlyPOP is looking farther to launch flights from London’s Stansted Airport to Amritsar and Ahmedabad in India when border restrictions ease, banking on VFR (Visiting Friends and Relatives) traffic.

Besides these carriers, it is an impressive list of startups around the world.

In South America, new ventures include Ita Linhas Aereas (Brazil), Nella Linhas Aereas (Brazil), Ultra Air (Colombia) and Ecuatoriana Airlines (Ecuador).

In Europe, Norwegian carrier Flyr is offering passengers a “digital, flexible and honest air travel experience.” Simplicity is the key, with no change fees and baggage restrictions besides the low fares. In Denmark, Airseven will operate charters instead of flights on scheduled routes. Icleandic startup airline PLAY founded by two former executives of WOW Air which went bust plans to replicate the latter’s short-lived success with flights to European and US destinations. Italy’s EGO Airways aims to deliver a “tailor-made service” whereby customers may purchase additional services such as hotel rooms and car hire.

South African carrier LIFT commenced domestic operations in December last year. Wizz Air of the Untied Arab Emirates connects Abu Dhabi with Greek destinations.

In Asia, Flybig is a new Indian regional airline launched at the beginning of this year. Vietravel Airlines and Bamboo Airways are Vietnamese startups. The latter has obtained the US Department of Transport (DOT)’s permission to operate to Los Angeles International Airport and San Francisco International Airport. South Korea’s Aero K plans to operate not only domestic services but also international flights to Japan, China, Taiwan and Vietnam.

Down south, Pasifika Air plans to launch direct services from Wellington and Christchurch in New Zealand to the Cook Islands next month.

That’s the marvel of the airline industry. In good and bad times, new carriers continue to sprout even as history has shown how not few of them have come and go. It’s the entrepreneurial spirit that keeps some of them going where others fear to tread if only for the sweet taste of success while it lasts.

Success naturally breeds growth which leads to expansion. There is the risk of over expansion in a highly competitive market as unit cost rises. Many of the start-up airlines are dependent on leisure travel, and cost is an important consideration. BA’s launch of a regional carrier out of Gatwick is just another example in history of how legacy airlines try to check the reach of low-cost airlines competing in the same market. A number of them are still engaging in tier and parallel operations.

Much also depends on how long the present conditions favouring short-haul travel would continue to hold sway. The world will open up, albeit slowly and cautiously as more countries become resigned to living with the corona virus than stay locked-down indefinitely. Recovery to pre-pandemic levels is not expected until 2024, but uncertainty continues to loom large on the horizon. Until the global situation stabilizes to an acceptable level, the short-haul may continue to be preferred over the long-haul.

For those startups which are thinking of flying farther, they may face a bigger challenge competing with leading airlines which nonetheless cannot ignore the competition.

COVID-19: How some countries are opening up to international travel

As airlines, airports and tourism suffer from the blows of the Covid-19 pandemic, some countries are looking at ways to relax travel restrictions yet keep the spread of infection under control.

A number of countries are still in a state of lockdown. Australia bans travel overseas for all citizens and do not allow entry for visitors. Even returning residents are subject to quotas for re-entry. Japan too is not admitting foreigners, so also China although domestic travel is regaining momentum.

Travellers are confounded by how quickly the rules may change either way, and this can be unnecessarily disruptive. Many fear they may be stranded abroad as a consequence as when British holidaymakers in Spain were forced to cut short their vacation to avoid new rulings on self-quarantine for re-entry into the UK.

There is almost nothing anyone can do if a country remains in a state of complete lockdown (with exceptions for essential travel). But some countries are negotiating reciprocity to allow entry for travellers between them. The idea for safe or green travel corridors has long been floated, particularly between close neighbours such as Australia and New Zealand, or between countries which have succeeded in controlling the spread of the virus.

While ideally the considerations should be health-safety bias, this may not always be the case as it becomes one of scratching each other’s back or be tantamount to a case of tit-for-tat. Already if you look at the state of infection around the world, some countries which may not be looked upon favourably by some may otherwise be considered admissible by others.

In the end, the policy may be unilateral, and this runs into the usual stumbling blocks.

A major hurdle for travellers is the mandatory quarantine as required by most countries even if they were prepared to admit a limited number of international travellers. This is usually 14 days based on the broad findings that a person may take as long as that before any sign of infection manifests itself. When this was first mooted by the British government as a condition for opening up its borders, carriers such as British Airways, Virgin Atlantic and Ryanair were quick to point out that it would stifle rather than encourage travel.

Indeed, very few visitors, if at all there were any, would relish the notion of being locked away at some designated hold-up for 14 days before they could be allowed out to do anything during what little might be left of a vacation, The regulation is as good as telling visitors to stay away.

Now some countries are considering reducing the quarantine- period for travellers from some countries which int heir opinion are considered low-risk. Singapore, which is lifting the requirement for mandatory quarantine for travellers from New Zealand and Brunei are reducing the period to one week for others arriving from countries including Malaysia, China, Taiwan, Vietnam and Australia (with the exception of the state of Victoria, and one wonders if this exception may now cover New South Wales in view of a resurgence of the virus there). Iceland goes further to require visitors to isolate only for five days if they agree to subject themselves to two tests, one upon arrival and the second at the end of the shorter quarantine period.

However, will a reduced period of quarantine encourage leisure international travel? Not many though will jump at the offer as it still adds up to lost days and the cost that goes with it. This probably explains why some countries such as Albania and North Macedonia are opening up their borders to all travellers free from restrictions. Andorra does it selectively for travellers within the European Union while requiring travellers from outside the EU to be holed up for 14 days.

Credit Diego Delso / Wikimedia Commons

Some countries which are popular for their island resorts are opening up but limiting travel to these locations. Thailand, for example, is opening Phuket in October to visitors for long-term stay of at least 30 days, the first two weeks to spent in quarantine at a hotel. The rest of the country is not ready to admit visitors, and Phuket shall serve a trial to see if it would work for other locations. Apparently, other countries in the region may also implement similar “tourism bubbles”. Bali in Indonesia which had scheduled to reopen in September has postponed the plan and may not welcome international travellers until 2021.

The global situation remains fluid, and while many coutnries are keen to revive tourism, it is a matter of balancing the benefits with the downside of a reurgence of the virus which can undo all the work they have done to stay ahead of the curve. For many travellers, while health safety remains utmost in their mind as to whether it is time to take that vacation, it may also be too much of a hassle to be skiing around the ever changing rules.

Changi Airport upgrades while others take a break

Airlines are among the worst hit during the current Covid-19 pandemic. Many of them have reduced passenger capacity to a trickle, and others have suspended entire operations. This in turn takes a heavy toll on the business of airports.

According to the International Air Transport Association, global air travel has fallen by 90 per cent.

Hub airports in particular are reeling with excess capacity. Smaller airports risk losing their erstwhile status even after the pandemic. British Airways, for example, has announced it would not return to London Gatwick.

While it is still uncertain when normal airline operations will resume, experts are of the view that it will take at least up to 18 months. So what do airports do until then?

Courtesy Reuters

Singapore Changi Airport, voted the world’s best airport, for one is not taking it lying down. It operates out of four terminals with a total capacity of 80 million. In 2019, the airport served 68 million passengers. However, with traffic dipping by 90 per cent, the airport is maximising use of its resources and seizing the opportunity to upgrade its facilities.

Terminal 2 has been closed for upgrading works. But then Changi is known to be constantly upgrading even in good times which helps it maintain its top spot in the world rankings. In fact, there were already plans to carry out the works at the terminal. But the lockdown means this can be done without inconveniencing its customers. And instead of the planned completion in 2024, the new terminal will be ready for re-opening some time in 2023.

There is a possibility that Terminal 4 with a capacity of 16 million may also be closed. The main users include Cathay Pacific, Korean Air and AirAsia. Cathay which used to operate several daily flights has pared the number down to two or three weekly. The Hong Kong carrier has since moved back to Terminal 1 temporarily.

It may be said that Changi never rests, reminding one of the lines written by Henry Wadsworth Longfellow:

The heights by great men reached and kept
were not attained by sudden flight,
but they, while their companions slept,
were toiling upward in the night.

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.

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.

Malaysia Airlines can’t make up its mind

Courtesy Reuters

While beleaguered Malaysia Airlines (MAS) gets deeper into the red and is looking for a strategic partner to prop it up, it seems not to be in any real hurry to accept any of the proposals it is said to have received. It has been reported that MAS needs up to RM21 billion (USD5.17 billion) to stay afloat until 2025.

A new slate of potential white knights made known recently, one different from the initial list, include AirAsia Group Berhad, Japan Airlines, Air France-KLM and Malindo Airways. No mention was made of four other local companies and Qatar Airways which subsequently clarified that it was not considering equity participation but interested in helping MAS get back on its feet. The proposals by the local companies apparently didn’t sell as they had limited or no aviation experience.

What has since changed? AirAsia which had previously insisted it was not interested has now emerged as a front-runner, which industry observers had at the onset said would be the best bet of success for the ailing MAS. AirAsia chief Tony Fernandes had proposed a merger to include budget long-haul AirAsia X. It is however understandable that the powers that be may not be too enthusiastic about being taken over by a rival compatriot which is a budget carrier and which has grown bigger than the national flag carrier.

Japan Airlines seems lukewarm about its interest which has been fanned by a commercial partnership with MAS to open access to each other’s destinations in their respective countries. The Japanese carrier continues to maintain its interest in expanding that partnership but steers clear of a firm potential investment in MAS. If at all it is interested, it is believed the stake would be small.

Air France-KLM on the other hand is said to have proposed a 49-percent take-up. However, that too has become an “iffy” judging by a statement released by the Euorpean conglomerate: “Air France-KLM had previously been in contact with Malaysia Airlines’ shareholders, but at this stage Air France-KLM is not a current party to the sales process of Malaysia Airlines.”

Malindo Airways is unlikely to be able to stand up against AirAsia in the run-in.

Why is MAS hesitant or is it pussy-footing, hoping for a better deal? Over time, the interest has shifted. It seems there is division within the company. The proposals by foreign companies are said to be better than those by local contenders, but there is reservation about selling out to an alien entity.

However, the saga holds a mystery card. Malaysian prime minister Dr Mahatir Mohamad said “there are about five proposals but of course some of them are just no go.” The fifth proposal is not known. Is it a “no go” or could this be the surprise choice, and who could it be?

Previous speculation had thrown up names like British Airways which seems more interested in expanding its stronghold in Europe while preferring a wider commercial arrangement elsewhere.

More recently there was suggestion that Singapore Airlines might be interested to work with MAS to support each other in the region and world-wide. But the deep rivalry between the close neighbours which goes back a long way to when they split and became competitors is not something that is easily forgotten.

Apparently, Dr Mahatir was said to be unhappy with how the ongoing evaluation was proceeding, so it may not be long when MAS finally accepts the hand of one of the suitors, whether already named or yet to be known.