How Airlines Cope With Coronavirus Losses

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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 provides an update on the groups that have decided to reduce the airfoil and that have announced precautions for the coming months.

In its financial results, the French-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 CFO Erik Swelheim advised employees to “reduce costs to the minimum level to guarantee operational security“, In a letter consulted by the AFP. Opposite, Air France has initiated a hiring freeze as well as a reduction in expenses: the company’s financial manager, Steven Zaat, asked the managers to limit so-called “discretionary»(Trips, parties, seminars, calls for consultants), as well as limiting the operating expenses of the various services. In parallel, certain communication or marketing campaigns have been postponed.

The Belgian company has announced a 30% reduction in 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 found “rapid decline in demand” in Europe. The company is currently studying “economic measures, such as temporary layoff“And has frozen hiring for now.

The British company announced on 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 trips) to Italy are also expected to be canceled between March 13 and March 31.

Owner of British British Airways and Spanish Iberia, the International Airlines Group (IAG) has announced earnings prospects “affected by lower demand for coronavirus“, end of February. Suspension of flights to China, cancellation of many events in 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 “cost initiativesAcross the business. Like its competitors, IAG prefers not to comment on expected losses, justifying its choice by the uncertainty that surrounds the coming months. He therefore prefers to highlight his current financial strength.

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.

German Lufthansa this week announced a series of measures to cut costs for better “face the economic effectsOf the virus, including a hiring freeze, a suspension of training courses scheduled for certain agents in April 2020 as well as a reduction in administrative budgets. The company also offers its employees “unpaid leave effective immediately“.

The city-state-based company recalled that the epidemic was “important challenge“For its teams, with a request to China”severely affected“. So she has “considerably reduced»Its flights to the Middle Kingdom, in February and March 2020. A decision imitated by its subsidiary SilkAir. Singapore Airlines Limited (SIA) Group “will continue to be proactive and agile in making appropriate network adjustments and managing costs strictly“, He warns, explaining having set up a working group to monitor the coronavirus.

In late February, the Finnish national carrier 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 wrote in a press release, adding that its result over this period will be”significantly lowerTo 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 “assess how to adjust its costs from 40 to 50 million euros, with measures relating to personnel, sales and marketing activities, development initiatives“, especially. Temporary dismissals are envisaged, as well as reductions in the number of recruitments. “We will take appropriate measures to adapt our costs, operations and resources“Said Group CEO Topi Manner.

  • The American giants are reducing the airfoil

Based in Atlanta, the American Delta decided to cut 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 so 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 leave without pay, reports Reuters. “With such an uncertain outlook, saving our cash is now the essential point to protect our business“Worried his 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 his 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 only three days per week, from mid-February to the end of June. “Low travel demand is likely to continue during the summer season and we must take additional measures to stay afloat“, She warned.

  • 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 from the passenger sector […] with carriers in the Asia-Pacific region“, Or”$ 27.8 billion in revenue lost in 2020“. Worldwide, the total loss is expected to reach $ 29.3 billion, corresponding to a 4.7% drop in demand. For the time being, IATA’s 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 revenue per passenger and per kilometerFor Asian companies.

Note, however, that this forecast will need to be revised upward as the virus spreads. However, companies will be able to count on state aid on the one hand, and particularly low fuel prices on the other to limit the damage. Still, the sector crosses “difficult hoursIn the words of IATA Director General Alexandre de Juniac: “Airlines have to make tough decisions about capacity reductions and sometimes even route reductions“He warned in a statement, stressing that the year promises to be”very hard” for professionals.



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