The Final Flight?: Emirates cut flights, pay and recruitment

April 15, 2020

2 min read

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What's going on here?

The Dubai-based airline has announced plans to suspend all passenger flights, cut employee pay, and freeze recruitment to preserve business viability amidst the COVD-19 pandemic.

What does this mean?

The Emirates Group is one of the world’s largest airlines. They have recently announced new measures to combat the financial devastation caused by the COVID-19 epidemic. The airline will reduce the salaries of the majority of its staff by 25% to 50% over the next few months with presidents Sir Tim Clark and Gary Chapman forgoing their entire wages. The state-owned carrier will freeze non-essential recruitment and encourage employees to take leave during this period. However, Emirates will continue running cargo operations and shipping essential goods including medical supplies all across the globe. 

The Chairman and CEO of the Emirates Group Sheikh Ahmed Saeed Al Maktoum stated, “as a global network airline, we find ourselves in a situation where we cannot viably operate passenger services until countries reopen their borders, and travel confidence returns”. 

Customers who are no longer able to fly may request a travel voucher from Emirates which is valid for one year from the date of issue. Others can request a refund or fly at another time. This is in response to the United Arab Emirate (UAE) government’s suspension of all passenger services from 25th March 2020 to contain the spread of COVID-19.

What's the big picture effect?

The COVID-19 pandemic has caused devastating losses across the economy but the airline industry is particularly hard-hit. There has been a reduction in air travel as countries shut their borders and issue self-isolation directives, asking individuals to avoid non-essential travel. The fear of infection has also put people off from going to crowded spaces for a long duration of time, including airports. 

Airlines are attempting to preserve cash; many are scaling back their capital expenditure by deferring purchase of new fleets, cancelling flights, and encouraging or forcing employees to take unpaid leave. The International Air Transport Association (IATA), a trade group, has projected that the coronavirus could cost the airline industry $113bn in lost revenue this year. 

Fortunately, global regulators have temporarily waived rules requiring flight slots to be used at least 80% of the time to prevent ghost flights (flights with no passengers to preserve valuable take-off and landing slots at airports). The steep fall in oil prices may help as well. Not all airlines will survive the pandemic. Flybe, the British airline, has already declared bankruptcy. Weaker airlines may turn into acquisition targets. 

Emirates may yet survive this global pandemic in light of the regulatory easing and attempts at the preservation of capital expenditure. The impact of COVID-19 on the airline industry is extensive but airlines that survive may come out stronger than before.

Report written by Robyn Ma

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