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Wednesday, October 4, 2023

Decline In Revenue-Passenger-Kilometer, High Cash Burn Rate Compell Airlines To Cut Jobs


Following the news that Cathay Pacific Airways is cutting over 5,000 jobs in Hong Kong and closing Cathay Dragon brand;

Animesh Kumar, Director of Travel and Tourism Consulting at GlobalData says, “Cathay Pacific joins a growing list of airlines, which have been cutting jobs or plan to do so. Recently, Singapore Airlines and Qantas Airways reduced their workforce by 20% and 30%, respectively. Airlines across the globe are going through the most severe crisis that they have ever encountered. Compared to the impact of SARS on the aviation industry, the monetary impact of COVID-19 is expected to be 45-50 times higher.

“Several countries have extended support and even Cathay Pacific received a bailout package a few months back. However, with more than 65% year-on-year decline in global revenue-passenger kilometer (RPK) in YTD 2020, high cash burn, and with the recovery still quite a distance away, airlines do not have many options left.

“Since the beginning of the pandemic, several countries have imposed a ban on flights and travel to arrest the spread of the virus. Though it is a necessary step, it has decimated the airline industry. While the severity of the pandemic has reduced and flights have resumed in many parts of the world, they have not helped in putting enough bums on seats. International travel has reduced by 85-90%. Safety and hygiene concerns as well as the economic impact of the pandemic, especially job losses, have severely impacted consumer sentiments.

“In the absence of sufficient incoming cash and funds, airlines are compelled to resort to unpleasant actions to decrease the cash burn rate. While the majority of the airlines have announced reductions in operations, routes, flights, and seats, they have not found a way to avoid staff adjustments. Airlines are cutting jobs, sending staff on furloughs, and syncing existing remuneration contracts with the present environment and productivity in order to try and keep their head above water. The crisis has endangered around 45-46 million jobs in aviation and related sectors across the globe.”

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