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How Airlines Cope With Coronavirus Losses

2020-02-29T06:39:26.362Z

Several companies have announced that the epidemic will limit activity in 2020. Many of them are taking action, even if it means tightening their belts.



Bad weather for the airlines. As the coronavirus spreads to an increasing number of countries around the globe, more and more companies are announcing that they are tightening their belts, in order to cope with an expected decline in the number of travelers. Le Figaro takes stock of the groups that have decided to reduce the airfoil and that have announced precautions for the coming months.

Read also: The global economy under the shock of the coronavirus

  • Air France-KLM

In its financial results, the Franco-Dutch group Air France-KLM explained that it expected a shortfall of around 150 to 200 million euros over the period from February to April 2020. Several reasons are cited , ranging from the suspension of flights to China to the decline in travel to the rest of the Asian continent.

At the end of February, the two branches of the group announced budgetary efforts to cope with the difficulties. KLM chief financial officer Erik Swelheim advised employees to " reduce costs to the minimum level to guarantee safe operations ", in a letter read by AFP. Opposite, Air France has hired a hiring freeze and cut spending: the company's financial manager, Steven Zaat, asked managers to limit so-called “ discretionary ” spending (travel, parties, seminars, calls consultants), as well as limiting the operating expenses of the various departments. In parallel, certain communication or marketing campaigns have been postponed.

  • Brussels Airlines

The Belgian company has announced a 30% reduction in its flights to northern Italy from March 2 to 14. The cities of Rome, Venice, Bologna and Milan are included in this perimeter. In addition, the group noted a " rapid decline in demand " in Europe. The company is currently studying " economic measures, such as temporary technical unemployment " and has frozen hiring for the moment.

  • Easyjet

The British company announced Friday a hiring freeze and a cut in administrative expenses. Among other austerity measures, salary increases, hirings and optional training were interrupted. In addition, the company offered its employees to take leave without pay. Just over 10% of flights (500 journeys) departing to Italy should also be canceled between March 13 and March 31.

Read also: Coronavirus: China is getting back to work very slowly

  • IAG

Owner of the British British Airways and the Spanish Iberia, the International Airlines Group (IAG) announced profit prospects " affected by the drop in demand due to the coronavirus " in late February. Suspension of flights to China, cancellation of numerous events around the world, reduction of business trips, spread of the virus in other countries… The group decided to operate an additional turn of the screw, with “ initiatives relating to costs ”across the enterprise. Like its competitors, IAG prefers not to comment on the expected losses, justifying its choice by the uncertainty that surrounds the coming months. He therefore prefers to highlight his current financial strength.

  • Qantas

The Australian company announced in its results a reduction in flights to Asia by 15% " at least until the end of May ". In total, " the impact of the coronavirus […] is estimated between 100 and 150 million Australian dollars " by the company, a figure that could have been higher if the price of oil had not been so low. Qantas is however ready to revise its systems upwards or downwards, depending on the progress of the epidemic.

  • Lufthansa

German Lufthansa this week announced a series of measures to cut costs to better " cope with the economic effects " of the virus, including a hiring freeze, a suspension of training courses scheduled for certain agents in April 2020 and a reduction in administrative budgets. The company also offers its employees “ leave without pay effective immediately ”.

  • Singapore Airlines

The city-state-based company recalled that the epidemic represented a " significant challenge " for its teams, with demand for China " seriously affected ". It therefore " considerably reduced " its flights to the Middle Kingdom, in February and March 2020. A decision imitated by its subsidiary SilkAir. The Singapore Airlines Limited (SIA) group "will continue to be proactive and agile in making appropriate network adjustments and managing costs strictly, " he warns, explaining that he has set up a task force to monitor the coronavirus.

Read also: Is the world economically too dependent on China?

  • Finnair

In late February, the Finnish national company warned investors that it had been forced to slightly lower its financial results. " Finnair currently estimates that the coronavirus situation will decrease demand, which will have a negative impact on revenues for the second quarter of 2020, " the company said in a statement, adding that its result over this period will be " significantly lower " to that over the same period last year. The group has chosen to adjust its network over the next few months, thereby reducing fuel consumption - and therefore costs - as well as airport costs.

In addition, Finnair " will assess how to adjust its costs from 40 to 50 million euros, with measures relating to staff, sales and marketing activities, development initiatives ", in particular. Temporary dismissals are envisaged, as well as reductions in the number of recruitments. " We will take appropriate measures to adjust our costs, operations and resources, " said group CEO Topi Manner.

  • The American giants are reducing the airfoil

Based in Atlanta, the American Delta has decided to reduce its flights to South Korea in February and March. A decision made after the sharp increase in the number of cases in the country in the morning calm. A similar decision was made by competitor United Airlines on Friday: the Chicago-based company reported that demand for China had collapsed, and therefore decided to cut service across the continent.

At the end of February, American Airlines chose to cancel its results, published a few weeks earlier. A decision justified by the significant uncertainties surrounding the activity, and the epidemic that completely changes the situation.

  • Concerns among Hong Kong companies

In early February, the Hong Kong company Cathay Pacific warned that its results for the first six months of the year should be worse than expected. So she plans to drastically cut back on her trips, and has encouraged her employees to take up to three weeks of unpaid leave, reports Reuters. " With such an uncertain outlook, saving our cash is now the essential point to protect our business, " worried its CEO. The group had already suffered greatly from the turbulent social climate in the city-state, and the interruption of flights to mainland China represents another obstacle.

At the same time, Hongkong Airlines also reported strong measures to cut costs: already in trouble, the company " has never known such a difficult period in its history, " wrote its management in a statement. She therefore chose to part with 400 employees, and asked the others to choose between taking at least two weeks of unpaid leave per month or working three days a week only, from mid-February to the end of June. " The low demand for travel is likely to continue during the summer season and we must take additional measures to stay afloat, " she warned.

Read also: Coronavirus: Coca Light could become scarce on the shelves

  • A global estimate that will go crescendo

Overall, the current epidemic is expected to have a significant impact on the sector. The International Air Transport Association (IATA) estimated last week that the COVID-19 crisis could lead to " a possibility of a 13% decrease in demand in the passenger sector [...] among carriers in the Asia region. -Pacific ", that is," revenue losses of $ 27.8 billion in 2020 ". Worldwide, the total loss is expected to reach $ 29.3 billion, corresponding to a drop in demand of around 4.7%. For the time being, IATA forecasts are based on a model similar to that of SARS, in other words a drop in demand for six months, followed by a gradual return to normal over an equivalent period. By comparison, this latest epidemic had resulted in “ a 5.1% drop in revenues per passenger and per kilometer ” for Asian companies.

Note, however, that this forecast will have to be revised upward as the virus spreads. The companies will however be able to count on State aid, on the one hand, as well as on the particularly low fuel prices, on the other hand, to limit the damage. The fact remains that the sector is going through “ difficult hours ”, in the words of the Director General of IATA, Alexandre de Juniac: “ The airlines must make difficult decisions concerning reductions in capacity and sometimes even routes, ” he warns. in a press release, stressing that the year promises to be " very hard " for professionals.

Source: lefigaro

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