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Friday, April 03, 2020

Airlines look to cut costs as virus hits biz; suspend foreign ops, reduce allowances

On Tuesday, Air India announced cost-reduction measures withdrawing entertainment allowance to executive pilots, in addition to cutting layover allowances for cabin crew.

Written by Pranav Mukul | New Delhi | Updated: March 19, 2020 4:52:41 am
coronavirus, coronavirus outbreak, coronavirus in India, airlines hit by coronavirus, coronavirus airports, cases in India, coronavirus India cases, Airport, coronavirus Delhi Airport, India news, Indian Express These measures include suspending international operations, reducing allowances for staff, and asking them to take leaves without pay. (Express Photo by Aaron Pereira/File)

With the COVID-19 disease continuing to spread across India, airlines in the country are starting to feel the heat from the plummeting demand for flights. To this extent, several airlines have initiated cost-reduction measures to maintain cash-flows at a time when their cash-generators — airplanes — remain grounded. These measures include suspending international operations, reducing allowances for staff, and asking them to take leaves without pay.

“As a result of the significant reduction in flying, Indian carriers may initially ground around 150 aircraft (including almost all of the international fleet), with this number expected to increase as more domestic operations are curtailed over the coming weeks. If the decline in traffic continues to be severe, the majority of the fleet could be grounded by April,” CAPA said.

“By extension, the reduced scale of operations could impact the requirement for around 30 per cent of airline staff and up to 50 per cent of ground handling staff. For first couple of months this could potentially be handled through mandatory leave and leave-without-pay initiatives for 1-2 months. But should the situation continue beyond a few weeks, it will quickly result in short-term retrenchment – with the prospect of re-employment once the situation improves. And an extended downturn will inevitably lead to significant redundancies,” it added.

On Tuesday, Air India announced cost-reduction measures withdrawing entertainment allowance to executive pilots, in addition to cutting layover allowances for cabin crew. In addition, it has temporarily reduced the fuel reimbursement deduction for all its officers by 10%. Air India has cancelled several of its flights to destinations including China, Europe, West Asia and Southeast Asia.

Vistara on Wednesday announced that it will suspend its international operations from March 20 to March 31, in addition to temporarily adjusting its domestic capacity for March and April in view of reduced demand. GoAir, which has also suspended its international flights till April 15, has initiated a temporary rotational leave-without-pay programme to help the company counter the short term reduction in capacity, while ensuring that only a cross section of the employees stay away from the workplace, so it could ensure business continuity.

In line with global examples, sector experts have batted for sops from the government to aid the sector. “What Indian government can do to help airlines: 1. Pass on crude oil price reductions immediately 2. Reduce or defer taxes 3. Make loans or credit lines available. 4. Defer payments for fuel and aeronautical charges 5. Suspend route dispersal guidelines (RDG) or allow RDG pooling,” said Sanjiv Kapoor, former chief strategy and commercial officer, Vistara.

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