Thousands of airline staff face uncertain future at 'critical time'

Oscar Williams-GrutSenior City Correspondent, Yahoo Finance UK
Yahoo Finance UK
Norwegian Air laid off a 'significant' number of staff on Tuesday. (Nicolas Economou/NurPhoto via Getty Images)
Norwegian Air laid off a 'significant' number of staff on Tuesday. (Nicolas Economou/NurPhoto via Getty Images)

Thousands of airline staff around the world are facing an uncertain future, as coronavirus continues to wreak havoc in the travel industry.

Airlines around the world continued a wave of cost cutting on Tuesday as the spread of Covid-19 provoked flight cancellations.

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Norwegian Air (NAS.OL) announced it was laying off a “significant” number of staff and cutting 3,000 flights in response to falling demand.

British Airways (IAG.L) began offering its 45,000 staff unpaid leave in a bid to bring down costs, according to reports. BA declined to comment.

United Airlines and American Airlines junked 2020 forecasts and slashed costs in response to a slump in bookings.

Read more: British Airways, Ryanair, and Norwegian cancel flights to Italy

And the chief executive of Korea Air (003490.KS) warned the company could go bust if conditions persist.

“If the situation continues for a longer period, we may reach the threshold where we cannot guarantee the company's survival,” Woo Kee-hong wrote in a memo to staff seen by Reuters.

Airlines are facing huge costs from coronavirus, which has forced carriers to cancel flights and put travellers off booking trips abroad. The International Air Transport Association (IATA), an aviation industry trade group, last week estimated airlines could lose between $63bn (£50bn) and $113bn (£88bn) in revenues this year as a result of the coronavirus outbreak.

Things have got worse since that forecast was made, with Italy going into full lockdown on Monday evening. The emergency decree from Rome has forced airlines to cancel nearly a month’s worth of flights to the popular holiday destination.

“This is a critical time for the aviation industry, including us at Norwegian,” Norwegian chief executive Jacob Schram said in a statement on Tuesday. “We encourage the authorities to immediately implement measures to imminently reduce the financial burden on the airlines in order to protect crucial infrastructure and jobs.”

Read more: Italy to suspend mortgage payments during coronavirus outbreak

European Commission President Ursula von der Leyen told reporters in Brussels on Tuesday she would relax rules dictating airlines have to fly 80% of their allotted airport slots each day. That would cut down on fuel costs but airlines still face high fixed costs from staffing and fleet maintenance.

Last week, UK regional airline Flybe fell into administration. The company had been struggling for months but Flybe’s chief executive said the outbreak of coronavirus spurred its eventual demise.

Staff at other airlines around the world will worry their employers could face a similar fate without state support. At least $70bn of value has been wiped off the value of airline shares so far this year, according to Reuters, as investors worry about the industry slump.

“The magnitude and duration of COVID-19s impact on travel is unclear,” UBS analyst Jarrod Castle said in a note to clients on Monday. “Furthermore, the operational response is unclear in terms of capacity cuts, load factors, pricing and cost cutting in accessing the financial impact for airlines.”

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