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Global airlines will probably need to eliminate thousands more jobs absent additional government aid because demand is rebounding more slowly than expected.
“Unprecedented” unit cost reductions of at least 30 per cent are required if airlines hope to break even next year, Brian Pearce, chief economist at the International Air Transport Association, told reporters Tuesday. Second-quarter revenue for IATA members plunged 80 per cent amid a global travel slump and the group now expects air travel next year to be about half of what it was in 2019.
“The airline industry is in such a bad situation that we are obliged to cut costs,” IATA head Alexandre de Juniac said on a conference call. “We have done everything to preserve jobs, especially those which are highly skilled. If airlines are coming to a point at which they cut these jobs, and particularly pilots and flight attendants, it’s because they cannot do otherwise.”
Carriers worldwide have slashed about 35 per cent of their combined workforces since the start of the COVID-19 pandemic, according to IATA. In Canada, this has translated into tens of thousands of temporary layoffs at Air Canada, Air Transat and WestJet Airlines — and some permanent cutbacks.
Montreal-based Transat A.T. Inc., which owns Air Transat, has shrunk to about 1,300 active employees from 5,100 when the pandemic started in March, spokesman Christophe Hennebelle said Tuesday. He added that the company permanently cut about 100 staffers in the last few weeks amid weak demand.
As for Air Canada, it had about 16,400 full-time employees on average in the second quarter, according to the company’s most recent quarterly filing . That’s down from 33,000 in the first quarter.
IATA member carriers will probably burn through US$60 billion to $70 billion of cash next year, Pearce said. Cash burn in the second quarter of 2020 was about US$50 billion.
“We think the only possible option for airlines to close the cost and revenue gap is really by looking at wage costs” and the workforce, Pearce said. “The industry will still be burning through cash in 2021.”
IATA officials who briefed the media Tuesday insisted they’re not pushing for workforce reductions.
“By no means are we advocating for job cuts,” Pearce said. “The industry just has to get smaller, at least for the next 12 to 18 months given the much-reduced outlook for travel and revenues, and there must be some way of doing without completely draining airlines of their cash.”
While airlines have been doing all they can to reduce expenses — in part by retiring older, less fuel-efficient aircraft — fixed costs such as maintenance or leasing remain high. To make matters worse, oil futures point to rising airline fuel prices in 2021 even as demand remains tepid.
“This crisis is not a few months of downturn,” de Juniac said. “We are looking at much more than one year of severely depressed demand.”
To avoid “significant numbers” of airline failures, IATA officials say additional government support will be required. Alternatively, the introduction of effective COVID-19 testing regimes could allow governments to safely reopen borders without quarantine measures — thereby boosting airline revenue.
Governments have so far provided more than US$160 billion of aid to airlines globally, which “has kept the industry on life support,” Pearce said.
Canada is one of the few developed nations that haven’t bailed out airlines during the current health crisis. Transport Canada spokespeople didn’t immediately respond Tuesday to an email seeking comment for this story.
Discussions on pre-departure tests are under way with several governments and “solutions” should be deployed in time for the winter travel season, de Juniac said. Experiments are already taking place in countries including Canada, France, Italy and the U.S.
“Things are moving in the right direction,” de Juniac said. “We see more and more governments interested, we see more and more experiments.”
IATA represents 290 airlines, which together account for 82 per cent of global air traffic. Headquartered in Montreal, the association also has offices in Geneva.
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