Singapore

Job cuts hard to avoid for SIA, say experts

They say the airline could also try to cut costs elsewhere or receive government support to tide over crisis

Job cuts could be in the pipeline for Singapore Airlines (SIA), which is now overstaffed for current demand, said experts yesterday.

SIA could also try to cut costs in other areas, or possibly receive additional government support to tide it over the crisis, they added.

The airline had last week announced a net loss of $1.12 billion in the quarter ending June 30 - its worst quarterly showing. It also said it is reviewing the shape and size of its network over the longer term.

The International Air Transport Association has said it will take till 2024 for global passenger traffic to return to the level of last year.

Mr Nicholas Wyatt, head of research and analysis in travel and tourism at analytics firm GlobalData, said the recovery of international flights depends on how quickly the pandemic can be brought under control, but "there are few signs that this is happening".

But if airlines cut jobs excessively, they will be shorthanded should the market rebound quicker than expected.

Other options to manage costs could include renegotiating deals with suppliers or cutting in-flight amenities, said Mr Wyatt.

Ms Joanna Lu, Asia's head of consultancy at Ascend by Cirium, said that cutting staff costs, including through retrenchments, seems inevitable with continued low demand for air travel.

"If there is no major breakthrough in containing the virus in the next couple of months, it is extremely challenging for SIA to sustain its business scale."

While SIA has registered strong demand for cargo transport and could benefit from green lane arrangements, Ms Lu said these make up only small parts of the business it had before Covid-19.

Associate Professor Walter Theseira, an economist with the Singapore University of Social Sciences, noted that the crew manpower costs for SIA would have come down, given that crew are paid for the time spent in the air.

He said: "For SIA and other international airlines, it's really about whether their contracts allow them to pay crew the bare minimum and whether the crew want to stay on."

SIA expects its passenger capacity at the end of the second quarter of the 2020/2021 financial year to be just 7 per cent of what it was before the pandemic.

Separately, its chief executive Goh Choon Phong also announced last week pay cuts for all management and rank-and-file staff, as well as early retirement for ground staff and pilots. He also told staff to brace themselves for additional measures.

In the last few months, SIA has also been boosting its balance sheet. It has raised $11 billion since its financial year started in April.

CIMB Private Banking economist Song Seng Wun said: "I think SIA value-adds to the economy and contributes to Singapore's role as a transport hub... it is a national icon that must be protected and must be helped."

Employment