Airlines will need to cut more jobs to preseve cash, Iata says

Airlines need to bring costs down in line with weaker revenues as demand for travel remains muted

International passenger demand continues to be impacted due to the coronavirus pandemic related travel restrictions, International Air Transport Association (Iata) said on Wednesday. Toby Melville / RShow more

Airlines need to cut more jobs to reduce costs as travel demand remains muted in the wake of the coronavirus pandemic, according to the International Air Transport Association.

“To maintain last year’s level of labour productivity, measured by ASKs (available seat kilometres) per employee, employment would need to be cut 40 per cent. Further job losses or pay cuts would be required to bring unit labour costs down to the lowest point of recent years,” Iata’s director-general and chief executive Alexandre de Juniac said on Tuesday.

Most airlines across the globe have either furloughed their workers or cut jobs as revenues ground to a halt when flights across the world were grounded to stem the spread of the pandemic. Although international travel has resumed in most countries, demand remains weak as a result of quarantine measures and fears of infection.

Cathay Pacific Airways earlier this month announced that it will cut about 5,300 jobs based in Hong Kong and close its Cathay Dragon unit as part of a sweeping overhaul of the city’s flag carrier triggered by the halt in air travel due to the coronavirus pandemic. American Airlines, United Airlines, British Airways, Lufthansa and many other carriers have all announced plans to cut thousands of jobs in recent months.

“The industry has to get smaller at least for the next 12 to 18 months given the much-reduced outlook for travel and revenue and there must be some way of doing that without completely draining airlines of their cash reserves,” Brian Pearce, Iata's chief economist, said.

Global airlines are expected to burn through another $77 billion of cash in the second half of 2020 as the decline in revenue outpaces cost savings and various government wage subsidy programmes expire.

The average carrier now has 8.5 months' worth of cash left for operations, Iata said in an online media conference earlier this month. In the second quarter of the year, airlines used up an estimated $51bn of cash reserves as the Covid-19 pandemic decimated air travel demand.

Iata also urged governments to adopt Covid-19 testing prior to flight departures and to lift travel restrictions such as quarantine measures that are hurting travel demand.

“We are discussing with several governments and we are also experimenting with some testing that is put in place either by some airports or some of our members. We see experiments in France, in Germany, in Italy, UK and Canada, US and some other Asian and Middle East countries,” Mr de Juniac said.