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Singapore
Battered by the pandemic, Singapore Airlines (SIA) will eliminate 4,300 positions, as a slower-than-expected recovery in travel demand forces the airline group to restructure to face a new normal.
Of the 4,300 positions, 2,400 employees in Singapore and abroad could be affected by layoffs, while the remaining 1,900 positions will be accounted for through natural abandonment, hiring freezes and voluntary departure plans. Together, SIA, SilkAir and Scoot employed more than 21,000 people at the end of the previous year.
The downsizing exercise at SIA, one of the largest by a company in Singapore this year, is not surprising as the airline industry faces its biggest crisis yet.
BT understands by sources that the number of Singaporeans affected by layoffs is a single digit percentage of the 2,400 jobs.
In response to BT’s inquiries, a spokesperson for the Singaporean flag carrier said: “The SIA Group has always had a strong Singapore core, which will be further strengthened after this exercise.”
Economists BT spoke with said Singapore’s job losses could continue to rise and the unemployment level is likely to rise further as the nation takes a calibrated approach to reopening its economy. Singapore’s unemployment rate stood at around 2.9 percent in the second quarter.
“We may see further pressure on Singapore’s job market as companies make their way through this delicate economic recovery,” said CIMB Private Banking economist Song Seng Wun. He pointed out the most affected sectors such as aviation and those linked to the sector such as aerospace and airline catering companies.
Barnabas Gan, an economist at the UOB, expects the unemployment rate to hit 3.5 percent this year, especially as wage support in the form of the Jobs Support Scheme (JSS) shrinks for some sectors.
Other sectors that economists consider vulnerable to layoffs are construction and retail.
While the JSS has now been extended through March 2021, the most vulnerable industries will get 50 percent of the first S $ 4,600 of gross monthly salary for local employees, compared to 75 percent previously. The least affected sectors are receiving support of 10 to 30 percent and, for some, that support is even reduced in December.
Maybank Kim Eng Senior Economist Chua Hak Bin suggested that various government incentives may eventually help with job losses by the fourth quarter. “I think Singapore postponed the reckoning point. Many other countries saw unemployment rise in the second quarter.”
Maybank Kim Eng forecasts 180,000-220,000 job losses for the full year, suggesting a way to go from 148,000 layoffs in the first six months of this year.
At the same time, there are some areas that are doing better than others, such as e-commerce, logistics, healthcare, insurance and the financial sectors, helping job creation, the economists added.
In a note to staff on Thursday, SIA chief Goh Choon Phong said: “From the beginning, the priorities of the SIA group were to ensure our survival and save as many jobs as possible.
“Given the expectation that the road to recovery will be long and (uncertain), it has reached the point where we have to make the painfully difficult decision to implement involuntary downsizing measures.”
Affected SIA Group employees in Singapore are expected to receive one month’s salary per year of service, capped at 25 months. They will also receive a payment in lieu of their notification period and any bonuses due.
“The move is necessary as the group seeks to reduce the burning of cash,” said UOB Kay Hian transportation analyst K Ajith. “Personnel costs are the highest cash operating expense now that many of its planes are on the ground.”
He estimates that SIA can fully utilize the S $ 8.8 billion in funds it previously raised through a rights issue by the end of March 2021.
Including the S $ 8.8 billion, the Temasek-backed group has raised S $ 11 billion in liquidity so far and also has shareholder approval to issue another S $ 6.2 billion in additional mandatory convertible bonds next year if it is necessary.
In response to inquiries, an SIA spokesman said, without disclosing figures, that the restructuring, along with government support schemes and other cost-cutting measures at the airline, “would significantly reduce (its) salary costs.”
In recent months, the group has introduced measures to contain costs, such as deferring expenses, cutting salaries, implementing various plans for leave without pay, as well as offering voluntary early retirement or severance plans to ground personnel, pilots and the cabin crew. .
However, with travel not expected to pick up until 2024, nearly 1,000 cabin crew from SIA and SilkAir are expected to lose their jobs. The restructuring exercise will take place over the next week.
It is understood that talks between the pilots union and the airline are still ongoing, although the core of Singapore is expected to likely remain intact. Meanwhile, ground staff, who are represented by both the Air Transport Executive Staff Union (AESU) and the Singapore Airlines Staff Union (SIASU), are generally unaffected due to attrition, lack of fulfillment of duties and acceptance of voluntary schemes, BT understands.
“For the past six to eight months, the SIA Group has been trying to retain the crew,” said Alan Tan, director of SIASU. Approximately 1,600 crew members have been assigned to various Ambassador programs, such as medical care, transportation and contact tracing, as part of the government’s efforts to combat the pandemic.
Mr. Tan, who was with the SIA Group during the Sars outbreak in 2003, added: “This is one of the worst crises the airline has seen to date.” Several hundred employees were laid off during the Sars outbreak.
The pandemic has hit airlines around the world, as countries closed borders to control the spread of the virus. SIA, which spilled S $ 1.12 billion in red ink in the first quarter of fiscal 20/21, has said it expects to operate at less than half capacity by the end of March next year. In the same quarter, passenger transport collapsed 99.5 percent as SIA was hit harder than other airlines due to the lack of an interior.
With the recovery of air travel slower than anticipated, the group’s airlines are expected to operate a smaller fleet and reduced network compared to before the pandemic.
Analysts say the parent airline, which is on track to merge with SilkAir in the first quarter of 2021, will predominantly operate aircraft such as the Airbus A350 and Boeing 787, as well as SilkAir’s narrow-body Boeing 737. like the Boeing 777 and the A380 will likely be shelved anytime soon.
SIA shares closed at S $ 3.54 on Thursday, four cents less.
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