Airlines hit by Covid-19, cash flow constraints in Malindo Air?

In Malaysia, Malindo Air seems to be the first to reveal ‘cost-cutting initiatives’ linked to Covid-19. — Bernama pic
In Malaysia, Malindo Air seems to be the first to reveal ‘cost-cutting initiatives’ linked to Covid-19. — Bernama pic

KUALA LUMPUR, Feb 28 ― As countries close their borders for passengers especially from the influenza Covid-19 hit nations, airlines have started to feel the shivers with Malaysia's Malindo Air citing cash flow constraints.

Some have announced cost-cutting measures such as salary cuts for management and cabin crew, while others reduced growth and passenger target.

In Malaysia, Malindo Air seems to be the first to reveal “cost-cutting initiatives” linked to Covid-19, which is the official name for the 2019 novel coronavirus announced by the World Health Organisation.

In an internal memo sighted by Bernama, with Malindo Air’s chief executive officer Captain Mushafiz Mustafa Bakri’s name on it, reads that the airline had to curtail a vast number of its scheduled flight routes due to the operational challenges that were brought about by Covid-19.

Further to our earlier “cost-cutting initiative to stay afloat”, read the memo dated February 7, 2020, “this, in turn, has put a huge constraint on our cash flow.”

Given this position, Malindo Air has to stagger the payment of February 2020 salaries, it said.

The memo said all staff with a gross salary of RM5,000 or less will be paid in full today but for those with a basic or gross salary of more than RM5,000 will only get the basic salary and the balance will be paid on March 7, 2020.

Efforts to contact Malindo Air for further clarity was unsuccessful.

Similarly, Thai Airways had on Wednesday announced salary cuts for management with its senior management voluntarily reduced their salaries by up to 25 per cent for six months starting March.

The initiative was taken to alleviate losses from the impact of slowed down passenger travel following the outbreak, according to news reports.

Meanwhile, Hong Kong’s national carrier Cathay Pacific Airways has reduced flights due to Covid-19 and predicts a decrease in profit for the year.

The airline also asked its employees to take unpaid leave to decrease operational expenses as it potentially faces months of disruption ahead.

Malaysia’s low-cost airline AirAsia has cancelled selected flights to China, South Korea, and Taiwan  in light of health concerns over the spread of Covid-19 and offers full refunds.

Research firm CGS-CIMB Research, in a note, expects the airline group might post a core net loss of RM1.1 billion following lower demand and yields in Malaysia, Thailand and the Philippines, given its significant exposure to flights to China, Hong Kong and Macau.

Another local airline, Malaysia Airlines permitted cancellations with a full refund as well as free ticket alterations on flights to and from mainland China.

The International Air Transport Association (IATA) had announced that its initial assessment of the impact of Covid-19 shows a potential 13 per cent full-year loss of passenger demand for carriers in the Asia-Pacific region.

Considering that growth for the region’s airlines was forecast to be 4.8 per cent, the net impact will be an 8.2 per cent full-year contraction compared to 2019 demand levels.

“In this scenario, that would translate into a US$27.8 billion (RM117.5 billion) revenue loss in 2020 for carriers in the Asia-Pacific region — the bulk of which would be borne by carriers registered in China, with US$12.8 billion loss in the China domestic market alone,” said IATA, which represents some 290 airlines comprising 82 per cent of global air traffic. ― Bernama

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