Mar 18, 2020 (Nikkei) - Airlines in Asia are being sucked deeper into the coronavirus crisis after its escalation into a global pandemic sparked a wave of travel bans in Europe and North America.
Australia-based Qantas Airways announced Tuesday that it will cut its total group international capacity by around 90% until at least the end of May -- the latest drastic indication of how far world travel is set to be curtailed by efforts to curb the spread of the virus. About 150 aircraft will be grounded out of roughly 300 across the group.
In another sign of airlines preparing to hunker down, Hong Kong's Cathay Pacific struck a deal with aircraft lessor BOC Aviation to sell and lease back six Boeing 777-300ER planes in a deal worth $703.8 million to help the carrier's balance sheet. Cathay Pacific said last week that it had access to HK$20 billion of unrestricted liquidity but was seeking to increase the amount as it struggles through a moment of significant revenue cuts.
Aviation faced a crisis of "unprecedented magnitude," said Brendan Sobie, founder of aviation analysis company Sobie Aviation. "The situation is obviously exacerbated in markets where airlines were not in good financial position entering the crisis," Sobie said, "but even airlines that were relatively in good financial position will have issues in the coming weeks."
Across the region carriers have slashed capacity while asking or demanding that staff take unpaid leave. Many employees have been laid off.
Malaysia Airlines' 13,000 staff were warned in an email from chief financial officer Boo Hui Yeeeven that the group stood on the verge of bankruptcy. The airline cut up to 2,000 flights up to April, asking its employees to participate in a voluntary unpaid leave program for up to three months for five days a month. Top management has taken a 10% pay cut.
Malaysia's national carrier has been struggling since 2014 when one aircraft disappeared in flight and another was downed over Ukraine. Despite a $1.5 billion injection of government funds that year, a fierce competition with one of the most aggressive budget airlines, AirAsia, hindered the state-owned carrier's revival. It recorded a net loss of 791.71 million ringgit ($182 million at current rates) for 2018.
Many industry analysts are asking whether airlines are able to survive the sudden interruption to their cash flows. Asian airlines have faced fierce competition for many years but were able to withstand it thanks to soaring flight demand and a tourism boom. Now the coronavirus shutdown has exposed the weakness left by many carriers' rapid expansion.
