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Airline bankruptcies and restructurings (foreign)


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United outlines workforce reduction measures as union battle flares

By Jon Hemmerdinger6 May 2020

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United Airlines continues to reduce its workforce, disclosing plans to lay off broad swaths of office staff, warning of pilot furloughs and, facing union backlash, pitching a new voluntary leave programme.

The Chicago-based airline will reduce its management and administrative workforce 30% with job cuts effective 1 October, United head of human resources Kate Gebo wrote in a 4 May letter to staff.

In the meantime, United is requiring management and administration staff to take 20 unpaid days off work between 16 May and 30 September, and many of those staffers will transition to four-day workweeks.

United Dreamliner

A United Airlines Boeing 787

“We have to acknowledge that there will be serious consequences to our company if we don’t continue to take strong and decisive action, which includes making decisions that none of us ever wanted or expected to make,” Gebo says. “Governmental restrictions on travel, stay-at-home orders and the lack of a medical solution for COVID-19 have brought bookings and demand for travel basically to zero.”

In recent days United said 30% of its roughly 12,000 pilots would be affected by “a displacement”.

That term means “reshuffling of pilot staffing to adjust for less flying and [a] smaller fleet” through means such as shifting pilots to different aircraft types or transitioning captains to first officers, according to pilot union Air Line Pilots Association.

In a 4 May letter to pilots, United vice-president of flight operations Bryan Quigley warned the company might need to lay off pilots starting in October. The carrier cannot cut staffing until then due to stipulations under which it received US government coronavirus relief funds.

“If conditions do not improve before October, we won’t be able to avoid furloughs. You have my commitment to communicate any plan regarding furloughs as soon as we have details,” Quigley writes.

On 6 May, United also offered passenger- and fleet-service workers the option to take voluntary leave as an alternative to a previous plan that sparked a backlash from the International Association of Machinists and Aerospace Workers.

Under the previous plan, United would have transitioned full-time passenger and fleet-service staffers to part-time status, bringing employees’ weekly work hours from 30 to 40, the union said in a lawsuit filed 5 May.

Such a move would “slash pay and benefits of approximately 27,000” employees and violate both federal labour law and terms under which United agreed to take government aid, the suit claims.

In a 6 May letter to employees, United chief operations officer Greg Hart’s calls the voluntary leave option a “new solution” and stresses that the airline remains confident its previous plan did not violate law or government terms.

Full-time passenger- and fleet-service workers who accept voluntary leave will see their work schedules cut to 30h from 40h weekly but will retain full-time employment status.

“This proposed programme will only be successful if we have a high rate of participation” Hart adds. “Without a high level of participation, we will have no choice but to reconsider a mandatory reduction to 30h for our full-time employees.”

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Avianca to cut back fleet and close Peru division

By David Kaminski-Morrow11 May 2020

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Latin American carrier Avianca is to shut down its Peruvian division, and cut back the fleet of other carriers, as part of the reshaping of the company being undertaken following its filing for Chapter 11 bankruptcy protection.

Avianca Holdings sought protection on 10 May in a joint filing covering several of its airline divisions.

But it says it plans to “commence a wind-down” of its Avianca Peru division, as part of the “essential right-sizing efforts” to emerge as a more competitive company.

Closing the Peruvian operation will allow Avianca to “renew its focus on core markets” once the restructuring is complete.

Avianca Holdings’ bankruptcy protection filings state that a “significant number” of aircraft across its various airline fleets will be surplus to its requirements.

After the initial demand shock and a slow return to service, it says, air travel will stabilise at 20-30% below pre-crisis levels.

Avianca 787

Source: Avianca

Long-haul types including the Boeing 787 and Airbus A330 are among excess jets

Avianca had been operating a 156-jet fleet – including 143 passenger and 13 cargo aircraft – plus 15 turboprops at the end of 2019.

The company says it has started a comprehensive review of the fleet including suitability of individual aircraft to the Bogota hub which, while still under way, is likely to result in its returning excess aircraft to lessors and lenders.

Fourteen aircraft are listed as excess in its initial filing, including a Boeing 787-8 and two Airbus A330-300s operated by Avianca.

The other 11 aircraft are single-aisle jets – seven A320s, two A321s, and two A319s – from the fleets of Avianca, Avianca Ecuador, and Taca.

Avianca is seeking to reject leases, or abandon, the excess aircraft which, it says, will become “burdensome” as it proceeds with its re-organisation.

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38 minutes ago, dagger said:

Delta is retiring all of its 777s. I believe that save for a few 777-200LRs, they are all 777-200s of various variants. Delta's long-haul fleet will be A330s and A350-900s.

Exiting MD88/90 and B777 fleets.

For now, keeping the 767-400 and 717 fleets. That may change.

Pilot staffing forecast for remainder of 2020 and Q3 2021 is bleak.

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1 hour ago, dagger said:

Delta is retiring all of its 777s. I believe that save for a few 777-200LRs, they are all 777-200s of various variants. Delta's long-haul fleet will be A330s and A350-900s.

Would most of these 777's be considered the older variety ???

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2 minutes ago, AIP said:

Would most of these 777's be considered the older variety ???

Yup. In DL configuration, the 350-900 has same passenger capacity as the 777-200. DL had just completed a full fleet cabin overhaul of the 777 fleet.

If you are going to pull down fleet, may as well exit oldest aircraft with highest operating cost. Also a very small fleet type at DL.

There is still rumbling out there that DL is working on a deal with Boeing (who hold the leases on the DL 717 fleet) for a swap to 737MAX.

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Ryanair threatens closure of Lauda’s Vienna base

By David Kaminski-Morrow18 May 2020

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Ryanair Group is warning that it will close the Lauda Airbus A320 base at Vienna at the end of the month if there is no agreement on cost reductions.

It says the Lauda division “underperformed” during the fiscal year to 31 March 2020 as a result of competition from Lufthansa Group, of which Austrian Airlines is a part.

Ryanair Group has not given details of Lauda’s financial result because it says the division does not exceed the quantitative thresholds for reporting.

But it says its costs are “running ahead” of other airlines in the group, and the management team is putting in place a restructuring plan.

This includes discussions with unions on personnel savings to secure the Vienna base’s future.

Failure to agree “meaningful” cost reductions by 20 May, says Ryanair Group, will result in closure of the A320 base on 30 May, which will involve more than 300 job losses.

The airline had been serving over 80 destinations from Vienna, and a total of 60 from bases at Stuttgart, Dusseldorf and Palma de Mallorca.

But Lauda’s fleet has been grounded since 17 March as a result of the coronavirus crisis and is having to “completely rethink” its strategy and cut back growth plans.

The airline has “abandoned” plans to operate a base in the Croatian city of Zadar for Ryanair, the company adds.

Former Ryanair chief commercial officer David O’Brien has joined the Austrian carrier as joint chief executive.

Ryanair Group had been intending to expand the Lauda fleet to 38 aircraft during summer 2020, up from the 27 it currently operates according to Cirium fleets data.

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Lufthansa Group secures finance package from economic fund

By David Kaminski-Morrow25 May 2020

Lufthansa Group has secured approval from the federal German government’s economic stabilisation fund, WSF, for a €9 billion financial package.

Under the agreement the WSF will contribute up to €5.7 billion to Lufthansa’s assets including €4.7 billion in equity.

The measure will be supplemented by a syndicated three-year credit facility of up to €3 billion, provided by private banks and KfW – yet to be approved.

It says the “silent participation” is unlimited in time and can be terminated by the company – either in whole or in part – on a quarterly basis.

The remuneration will amount to 4% for 2020 and 2021, increasing gradually to 9.5% by 2027.

WSF will acquire shares to build up a 20% shareholding in Lufthansa Group at a price of €2.56 per share – equating to an overall cash investment of some €300 million.

It will be able to increase the shareholding further, to just over 25%, if there is a takeover of the company.

LH A350

Source: Lufthansa Group

Germany’s WSF fund will build up a 20% shareholding in the company

If Lufthansa Group fails to remunerate the fund then an additional portion of the WSF participation can be converted into another 5% shareholding from 2024 and 2026 – although the second conversion only becomes valid if the shareholding increase from a takeover has not been exercised.

Subject to Lufthansa’s fully repaying the participations and a minimum sale price of €2.56 per share, plus annual interest of 12%, the WSF is undertaking to sell its entire shareholding at the market price by 31 December 2023.

Lufthansa Group says the stabilisation package still requires the final approval of its management board and supervisory board, while the measures are also subject to shareholders’ and regulatory approval.

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To scale (based on annual revenue) that would be C$4.95B for AC (1/3rd as a credit facility) in exchange for a 20% stake and 2 seats on the board.

Looking at US and elsewhere, it seems that state aid has been on the order of 25% of annual revenue with 33-50% repayable loan portion.

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Air New Zealand grounds 777s and defers A321neo deliveries

By Cirium25 May 2020

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Air New Zealand (ANZ) will ground its Boeing 777-200ER and 777-300ER fleets until at least the end of this year as part of organisation-wide cost-cutting measures.

Including deferrals of planned Airbus A321neo deliveries, the airline has also deferred or cancelled almost NZ$700 million ($430 million) of expected capital expenditure to December 2022, it said today in an earnings update.

Cirium fleets data shows that ANZ’s existing fleet includes seven in-service 777-300ERs, between six and 10 years of age, and eight 777-200ERs, which are 13 to 15 years old and in storage.

The carrier also has seven in-service and stored A321neos, and another seven A321neos scheduled for delivery between January 2022 and April 2024.

Other measures include cancelling non-essential spending, reducing leasing costs and modifying various vendor and supplier terms.

The company expects to see annualised savings of NZ$350-400 million from a previously announced hiring freeze and 30% cut in staff strength that will affect 4,000 employees, and has scaled down its executive team accordingly.

Short-term incentive schemes have been suspended for the financial year (FY) ending 30 June 2020, while the chief executive, executive team and the board agreed to reduce income and fees by 15% through to December 2020.

These moves will reduce Air New Zealand’s average monthly cash outflows by approximately NZ$50 million to NZ$60 million for FY2021.

As at close of business on 25 May, the company’s short-term liquidity stands at approximately NZ$640 million, and it has yet to drawn down on the NZ$900 million loan facility from the government.

“Like all businesses at this time, we find ourselves facing an environment where revenues will be a small fraction of what we are accustomed to,” says chief financial officer Jeff McDowall.

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He adds: “We know that demand for air travel will eventually rebound, so we are cognisant of striking the right balance between removing cost from the business and ensuring the airline is in a strong position to ramp up as demand recovers.”

McDowall tempers expectations that come with the resumption of domestic flights. He says, “The recent move to Alert Level 2 has been a welcome reprieve, allowing us to get the domestic engine turning again, however it is clear that it will take some time for demand to return to pre-Covid levels.

“We are preparing for a scenario in which the airline is still 30% smaller than pre-Covid levels in two years’ time.”

Air New Zealand expects a 50% year-on-year reduction in its January to June network capacity, driven by an approximately 90% reduction in the April to June period. It therefore expects to report an underlying loss for FY2020.

The company says: “Given there is still a high degree of uncertainty regarding demand for air travel under New Zealand’s Alert Level 2, the period of time in which social distancing will be required on the aircraft and the timing of a shift to Alert Level 1, the airline will not be providing specific 2020 earnings guidance at this time.”

In the same update, the airline disclosed its estimates of other significant items that are not included in its calculation of underlying earnings for FY2020.

Losses on hedges is estimated at NZ$85-105 million for the whole of FY2020. These are driven primarily by fuel hedges, as overall capacity and fuel consumption nosedived even as the airline maximised utilisation by operating charter and repatriation flights, and cargo-only missions. These were, however, partially offset by gains from closing out foreign exchange contracts relating to foreign currency operating revenues and expenditures which are no longer expected to occur.

The airline also expects to book a non-cash impairment charge of NZ$350-400 million relating to some of its 777 aircraft. Reorganisation costs could come up to NZ$140-160 million and it expects to gain approximately NZ$21 million from the sale of airport slots.

“As we begin to operate more flights our immediate priority is ensuring customer safety and restoring your confidence and desire to travel,” chief executive Greg Foran says, addressing customers.

“There is no playbook for the situation we are currently facing, so we need to create our own.”

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May 31, 2020 06:31 PM IST | Source: Moneycontrol.com

Emirates sacks 180 pilots in a bid to save cost, more layoffs likely

Reports had earlier said that Dubai-based airline plans to cut 30,000 jobs

 
 

Emirates, the state-owned carrier based in Dubai, has laid off about 180 pilots on May 31, as part of its larger plan to reduce costs after being low because of COVID-19.

Sources told Moneycontrol that the 180 pilots were first officers who were under training for type-rating on the A380. These pilots were on probation.

"This is the first phase of the layoffs. These pilots were called to the office and given the letters," a senior executive said. "More announcements are expected tomorrow," the executive added.

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While the notice period for those on probation is seven days, the airline said that it is extending this to 14 days, as a 'gesture of goodwill.' The letter added:

"Your last day of service would, therefore, be June 15, and you will continue to receive your usual company medial benefits... should you be unable to repatriate due to travel restrictions, your visa will be extended being your last day of service."

The news comes weeks after reports emerged that the airline will layoff 30 percent of its crew and pilots.  This will translate to about 30,000 employees.

Emirates' regional rivals Etihad Airways and Qatar Airways have also cut jobs or plan to do so. World over, the aviation sector has been among the most impacted because of COVID-19. Many airlines, including Virgin Australia, have filed for bankruptcy.

In India too, all airlines have been forced to cut jobs and have sent employees on leave without pay. Though domestic flights resumed on May 25, demand has been soft, signalling a tough, and long, road back to normalcy.

Fleet downsizing

Emirates had evolved into one of the most premium airlines globally, with a reputation for fine service. The focus had seen it becoming the largest operator of the jumbo A380 aircraft in the world.

But now it plans to retire a large proportion of its fleet. This would include about 40 of its 115, A380 aircraft.

Though the airline had resumed operations earlier in the month, traffic remains affected as many countries are yet to open up their skies. Emirates President Tim Clark has mentioned that the airline could be up to 30 percent smaller because of the COVID-19.

Moneycontrol has mailed Emirates for a response. The story will be updated once the airline responds.  https://www.moneycontrol.com/news/business/emirates-sacks-180-pilots-in-a-bid-to-save-cost-more-layoffs-likely-5339451.html

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