The Singapore Airlines Group has announced that it will make thousands of staff across its business redundant as the effects of COVID-19 on its operations continue to have a crippling impact on the aviation industry both locally and around the world. The news comes just a few weeks after the group reported a record loss of S$1.1 billion for the April to June 2020 period.
Despite the airline’s CEO stating a focus on recovery rather than retrenchment three months ago, with no significant improvement in the market outlook since then a permanent reduction in headcount has become impossible to avoid.
“This decision was taken in light of the long road to recovery for the global airline industry due to the debilitating impact of the Covid-19 pandemic, and the urgent need for the Group s airlines to adapt to an uncertain future.”
Singapore Airlines
Background
Since the start of the COVID-19 pandemic, Singapore Airlines has been cutting its own costs including those related to its 16,000-strong workforce.
Measures have included pay cuts alongside voluntary and compulsory no-pay leave in several roles. While pilots and cabin crew receive their basic salary, they are also thought to take a significant hit from the loss of hourly flight pay.
With additional fundraising, the group seemed well placed to ride out a pandemic lasting several months, with government and shareholder support put firmly in place.
- In March 2020 the Singapore government stepped in to support 75% of wages in the aviation sector through a Jobs Support Scheme (JSS), up to a monthly gross wage of S$4,600.
- The same month SIA offered shareholders S$15 billion in new equity 10-year convertible bonds, underwritten by parent company Temasek Holdings.
- The airline also secured a S$4 billion bridging loan with DBS to bolster liquidity.
- In July 2020 the airline used some of its Airbus A350s and Boeing 787s to lock in secured financing on long-term loans totalling S$750 million.
- In August 2020 the Singapore government extended the JSS to March 2021, with the aviation sector benefiting from 50% of wages supplemented by the scheme.
These programmes have made SIA one of the most financially supported airlines globally during the COVID-19 pandemic.
Retrenchment is now happening
Sadly the government and financial support will now clearly not be enough.
In an announcement today, CEO Goh Choon Phong said that the group will cut around 4,300 positions, across all parts of the business, though only 2,400 of these should be compulsory.
That represents around 15% of the airline’s 2019 workforce.
“We need to cut around 4,300 positions across Singapore Airlines, SilkAir and Scoot in Singapore and our overseas stations. However, the SIA Group has implemented a strict recruitment freeze since March 2020, and we have not filled vacancies that opened up due to resignation and retirement. We also offered the most generous Special Early Retirement Scheme (SERS) in SIA’s history for ground staff and pilots, as well as a Voluntary Release Scheme (VRS) for cabin crew, to support those who may have already been thinking of leaving for personal reasons. Collectively, these measures have allowed the Group to eliminate some 1,900 positions and helped to mitigate the impact on staff.
“As a result, the potential job cuts across the Group have been reduced to around 2,400.”
Goh Choon Phong, CEO, Singapore Airlines
Mr Goh went on to highlight how difficult the decision has been for the company.
“Having to let go of our valuable and dedicated people is the hardest and most agonising decision that I have had to make in my 30 years with SIA.”
Goh Choon Phong, CEO, Singapore Airlines
This is the first time Singapore Airlines has made compulsory redundancies since the SARS crisis in 2003, when a total of 414 staff, including pilots and cabin crew, left the business under similar circumstances.
Future shape and size
When Singapore Airlines announced its worst ever quarterly loss in July 2020, it was already alluding to a ‘downsized’ recovery for the airline, emerging back into a market with lower demand than we’ve seen in recent years.
Revenue across the group nosedived by close to 80%, compared to the same quarter in 2019, a S$3 billion+ hit, with passenger carriage falling by 99.4% – almost completely to zero.
The International Air Transport Association (IATA) has said it will take until 2024 for global passenger traffic to return to 2019 levels, a view SIA appears to support.
The airline has already stated that it will have to set aside around S$1 billion in write downs on older aircraft, including older Airbus A380s, as it reshapes into a future size yet to be determined.
There’s certainly no ‘V-shaped’ recovery in sight for the airline, with only around 11% of usual capacity planned to be restored by November 2020, given the strict border restrictions in force almost globally.
In today’s announcement, SIA confirmed this downsizing is effectively set in stone.
“In order to remain viable in this uncertain landscape, the Group’s airlines will operate a smaller fleet for a reduced network compared to their pre-Covid operations in the coming years.”
Singapore Airlines
Summary
Compulsory retrenchments across the SIA Group companies are a sad reflection of the current state of the aviation industry, especially in countries with a limited or non-existent domestic market like Singapore.
These cuts unfortunately aren’t too surprising in a company as large as Singapore Airlines, which spends over S$2.5 billion in staff costs during a normal year.
With the airline confirming its recovery target is for a permanent fleet and network downsizing, sadly fewer staff are required across the business to efficiently support operations for years to come.
The only non-SIA Group airline based in Singapore, Jetstar Asia, already completed a redundancy process in July 2020, trimming 25% of its workforce as it seeks to return to the skies using only 13 of its 18 Airbus A320 aircraft next year.
With other airlines globally doing the same, it was a matter of time before Singapore Airlines had to follow.
The likelihood of demand for flying returning to 2019 levels over the next few years seems low, so the full post-recovery shape and size for Singapore Airlines and its subsidiaries will simply have to be smaller as a result.
The carrier has said it will provide more information on that “future shape and size” by November this year, though we can expect many older aircraft including some Airbus A380s and Boeing 777s to never return into passenger service with the carrier.
(Cover Photo: Olaf Schuelke / Alamy Stock Photo)