SIA to eliminate 4,300 positions

Singapore

BATTERED by the pandemic, Singapore Airlines (SIA) will cull 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 staff in Singapore and abroad could be hit by lay-offs, while the remaining 1,900 roles will be accounted for through natural attrition, a recruitment freeze and voluntary-departure schemes. Collectively, SIA, SilkAir and Scoot employed over 21,000 staff at the end of the previous financial year.

The retrenchment exercise at SIA, one of the bigger ones by a company in Singapore this year, comes as little surprise as the airline industry battles its biggest crisis yet.

BT understands from sources that the number of Singaporeans affected by lay-offs are a single-digit percentage of the 2,400 roles.

In response to queries from BT, a spokesperson for Singapore's flag carrier said: "The SIA Group has always had a strong Singapore core, which will be further strengthened after this exercise."

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Economists that BT spoke to said that job losses in Singapore could continue to mount and the unemployment level will likely rise further as the nation takes a calibrated approach to re-opening its economy. Singapore's jobless rate stood at about 2.9 per cent in the second quarter.

"We may see more pressure on the Singapore labour market as companies navigate their way through this delicate economic recovery," said economist Song Seng Wun from CIMB Private Banking. He pointed to hard-hit sectors such as aviation and those linked to the sector such as aerospace players and airline caterers.

UOB economist Barnabas Gan expects the unemployment rate to hit 3.5 per cent this year, especially as wage support in the form of the Jobs Support Scheme (JSS) tapers off for some sectors.

Other sectors seen by economists as vulnerable to retrenchments include construction and retail.

While the JSS has now been extended till March 2021, the most vulnerable industries will get 50 per cent of the first S$4,600 of gross monthly wages for local employees, down from 75 per cent previously. Less hard-hit sectors are receiving 10-30 per cent support and for some, that support even tapers off by December.

Maybank Kim Eng senior economist Chua Hak Bin suggested that the various government incentives may eventually help with job losses by the fourth quarter. "I think Singapore deferred the point of reckoning. Many other countries saw unemployment jump in the second quarter."

Maybank Kim Eng forecasts 180,000-220,000 job losses for the full year, which suggests some way to go from the 148,000 lay-offs in the first six months of this year.

At the same time, there are some areas that are performing better than others such as e-commerce, logistics, healthcare, insurance and the financial sectors, which helps with job creation, economists added.

In a note to staff on Thursday, SIA chief Goh Choon Phong said: "From the outset, the SIA group's priorities 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 come to the point where we have to make the painfully difficult decision to implement involuntary staff-reduction measures."

Affected SIA Group employees in Singapore are expected to receive one month of salary per year of service, capped at 25 months. They will also receive pay in lieu of their notice period, and any bonuses that are due.

"The move is a necessary one as the group seeks to reduce cash burn," said UOB Kay Hian transport analyst K Ajith. "Staff costs is the highest cash operating expense now that many of its aircraft are grounded."

He estimates that SIA may fully utilise the S$8.8 billion in funds that it earlier raised via a rights issue by end-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 a further S$6.2 billion in additional mandatory convertible bonds next year should it need to.

In response to queries, an SIA spokesperson said - without revealing figures - that the restructuring, coupled with government support schemes and other cost-cutting measures at the airline would "significantly reduce (its) wage costs".

Over the past few months, the group has introduced measures to contain costs such as deferring expenditure, cutting salaries, rolling out various no-pay leave schemes, as well as offering voluntary early-retirement or release schemes to ground staff, pilots and cabin crew.

However, with travel not expected to recover till 2024, nearly 1,000 SIA and SilkAir cabin crew are expected to lose their jobs. The restructuring exercise is due to take place over the next one week.

It is understood that talks between the pilots union and the airline are still ongoing, although it is expected that the Singaporean core will likely remain intact. Meanwhile, ground staff - who are represented both by the Air Transport Executive Staff Union (AESU) and Singapore Airlines Staff Union (SIASU) - are generally not affected due to attrition, non-filling of roles and the take up for voluntary schemes, BT understands.

"For the last six to eight months, the SIA Group has been trying to hold on to the crew," said Alan Tan, head of SIASU. About 1,600 crew have been placed on various Ambassadors programmes such as healthcare, transport and contact tracing as part of the government's efforts to fight the pandemic.

Mr Tan, who was with the SIA Group during the Sars outbreak in 2003, added: "This is one of the worst crises that the airline has seen to date." A few hundred staff were retrenched during the Sars outbreak.

The pandemic has battered airlines globally as countries closed borders to control the spread of the virus. SIA, which spilled red ink to the tune of S$1.12 billion in Q1 of FY20/21, has said that it expects to operate at less than half its capacity by the end of March next year. In the same quarter, passenger carriage collapsed by 99.5 per cent as SIA found itself harder hit than other airlines owing to the lack of a hinterland.

With the recovery in air travel proving slower than anticipated, the group's airlines are expected to operate a smaller fleet and a reduced network vis-a-vis before the pandemic.

Analysts say that the parent airline - which is on track to merge with SilkAir in Q1 of 2021 - will predominantly operate aircraft such as the Airbus A350 and Boeing 787 as well as SilkAir's narrow-body Boeing 737. With travel demand depressed, bigger widebody aircraft such as the Boeing 777 and A380 are likely be sidelined in the near-term.

Shares in SIA closed at S$3.54 on Thursday, down four cents.