What do other airlines do for their staff?

It seems I hit a nerve with my previous post about COVID-19 impact on the airline industry. It seems many of my readers think that the cyclical nature of the industry is normal and that furloughs and layoffs are the standard.

First, it is worth noting that the airline industry has historically had such low margins that it had been always the butt of the investors joke

The worst sort of business is one that grows rapidly, requires significant capital to engender the growth, and then earns little or no money.

Think airlines. Here a durable competitive advantage has proven elusive ever since the days of the Wright Brothers.

Indeed, if a farsighted capitalist had been present at Kitty Hawk, he would have done his successors a huge favor by shooting Orville down. 

— Warren Buffett

Be that as it may, with the majority of the airlines being able to post a profit over the past few years. Profits doesn’t mean cash at hand, I am no economist, but read here.

The Airline industry made a revenue of 885 in 2019. The profits are a meagerly 3%. 29 Billion seems like a large amount of money, until you think that the airlines had to carry 925 Million passengers to make them.

That’s a profit of $30 per passenger. That’s a good year!

The Airline Industry has never made much money

Now this is how much profit the airline made over the past period. Now the charts below shows that COVID-19 cost the airlines the equivalent of ten years of profit!

IATA estimates of revenue change until March

So the airline industry finally got a good decade and made money for its owners, shareholders, investors, public, etc.. Now that is all swept away. This doesn’t take into consideration the month of may.

My colleagues in the US and Europe, it is essential to understand how the picture looks in other parts of the world. Unions have for years made sure that the Airline industry is looking at the staff as the only disposable cost.

When unions have been tough and adamant to fight for their members, the airline has seen this as unnecessary cost that they need to shed. There are places…

where layoffs are the last resort

Singapore Airlines has asked its pilots to take unpaid leave for up to seven days each month, starting 1 April.

For Etihad, the troubled carrier in the Capital City of Abu Dhabi, UAE Executives, pilots and engineers will be paid half their basic salaries and cabin crew would be paid 25% less in April, the email said

Emirates has sent an email to its staff, which our colleagues have sent to us and it says the same will befall its staff.

Emirates has deferred announcing any layoffs

A senior executive in Emirates told me, on condition of anonymity, that the strategy of the Airline requires having a pool of reserve pilots and it cannot afford to layoff many pilots. Replacing them to the standard acceptable to the Airline is not cheap or easy

Royal Jordanian, a smaller but certainly influential airline in the Middle East has also announced 50% reduction in salaries across the board. A memo that askapilot saw from their Flight Operation VP assured pilots that layoffs are a last resort. The pilot community in many parts of the Middle East are restricted from unionizing.

The VP who didn’t reply as of publication told pilots that the government announced a holiday and thus they will still be on paid leave until the official lock-down changes.

Royal Jordanian staff memo

Khalil Wahhab, Vice President of the Independent Trade Union of Air Transport Workers in Jordan told us that the trade union, which represents some 300 workers is actually following up individual cases with some airlines whom are thought to be violating the local laws.

However, he acknowledged that Royal Jordanian is actually paying the full salaries of March. The slowdown due to government imposing restrictions on travel is officially labeled as paid leave up-to the end of March

The government in Jordan seems to be more hands-on and some experts we spoke to can confirm that layoffs and furloughs are not allowed as per the latest decree.

To conclude

Pilots are essential to have airlines flying and they are essential in driving the airlines forward. However, depending on corporate culture and tone, they can be seen as part of the problem or part of the solution.

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