Cloudy path to post-pandemic recovery for some SEA airlines
BANGKOK (CNA) – It has been over a year since Captain Dejphon Poolpun took to the skies for the last time.
The Thai Airways pilot received no flight compensation, while his base salary was cut as the company suffered billions in losses.
The interruption of the flight brought about a complete change in his lifestyle. These days, he spends much of his time in the kitchen of his Bangkok home, baking platters of brownies for his Flying Sweets online store. The company has found a large group of loyal customers.
“Over the past year… I have earned over $ 3,000 per month,” he said. CNA. “In one day, I could sell 300 brownies when the business was booming. “
Due to the pandemic, he lost 60% of his pilot salary.
Captain Dejphon’s situation is not unique to those in the aviation industry. Across the region, many pilots and flight attendants have been made redundant, while others are forced to undergo substantial pay cuts. Many have had to supplement their income by selling food or other goods.
While Captain Dejphon is one of the success stories of how airline workers have been able to adjust to the sudden downturn, there are those who have had to sell their homes and cars to pay off their debts.
Meanwhile, airlines continue to suffer losses, forcing companies to downsize their fleets and employees and make drastic changes to their business strategies.
Thai Airways, for example, had to file a corporate reorganization request with the country’s central bankruptcy court. Meanwhile, others like Malaysia Airlines and Garuda Indonesia have started negotiation processes with aircraft leasing companies and creditors to restructure their loans.
For some, there might be light at the end of the tunnel. Buoyed by the strength of the domestic market, Garuda Indonesia said it could be poised to turn a profit this year, while pilots working for the airline said their workload and wages were slowly returning to the normal.
Meanwhile, Thailand hopes to gradually reopen parts of the country to foreign visitors in a bid to revive its tourism industry, one of the country’s main economic sectors.
But the path to recovery is still murky, industry players and analysts interviewed by CNA. A new wave of COVID-19 infections could force governments to reinstate travel restrictions, reduce customer confidence and derail tourism stimulus packages.
The pandemic has caused a massive drop in passenger numbers around the world, and carriers in the region have not been spared.
In 2019, Garuda carried more than 15 million passengers. Last year, that figure fell to 2.8 million. As a result, the company recorded a net loss of $ 1.07 billion.
It was a devastating blow for the Indonesian national carrier, which in 2019 made a profit of $ 122.4 million.
Due to the pandemic, Garuda decided to lay off 700 permanent and contract workers while another 15,000 were forced to suffer a pay cut of up to 50%. Garuda also wound up six of its subsidiaries in an attempt to streamline the business.
“The ongoing pandemic… had forced the company to make a number of adjustments,” Garuda CEO Irfan Setiaputra said in a May 21 statement. “We must take these steps to survive in these uncertain times.”
Instead of a bailout, the Indonesian government agreed to buy $ 600 million in newly issued bonds in November 2020, injecting new capital into the ailing company. At the time, Garuda already had negative net working capital and liabilities exceeding 80% of its assets.
Thai Airways suffered even greater losses. Although the company managed to carry 5.87 million passengers last year, this figure represents a 76% drop from 2019. The dramatic loss of passengers is one of the reasons Thai Airways recorded a net loss of $ 4.5 billion.
Financial difficulties caused by the pandemic forced Thai Airways to file a business reorganization petition with the central bankruptcy court in May last year. In its petition, the national carrier said its debt stood at more than $ 11.3 billion as of March 31, which exceeded its assets.
Since the submission, the airline has implemented various measures to reduce costs and increase revenue. These include reducing the workforce from 29,000 to between 14,000 and 15,000, reducing the number of planes in its fleet and asking employees to take unpaid leave.
Meanwhile, according to the company’s financial statements, Thai Airways had just $ 278 million in cash and cash equivalents at the end of 2020, up from $ 695 million the year before.
Bangkok-based aviation analyst Suwat Wattanapornprom of Asia Plus Securities said Thai Airways cash flow may only be enough for the company until early 2022. That, he said , could lead to a liquidity problem once the country decides to reopen international flights.
“At that point, when flights resume, Thai Airways may not have enough money on hand for the installation. This is because once he begins the rehabilitation, he will stop paying the creditors. But it also means the company would be required to transact cash for everything when it flies to any country, ”Suwat said. CNA.
Malaysia Airlines could face an even more difficult situation. The company has recorded losses for a decade, made worse by the double tragedy of the disappearance of the MH370 and the MH17 shooting in Ukraine in 2014. The Malaysian national company was then privatized and bought by the sovereign wealth fund Khazanah Nasional.
Even before the pandemic hit, Khazanah Nasional admitted his attempt to turn Malaysia Airlines Berhad back on track, in a report released by Parliament’s Public Accounts Committee, despite a total of 1.5 billion dollars.