Malaysia Airlines staff told to take unpaid leave as Covid-19 outbreak strains financials

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KUALA LUMPUR (March 12): Malaysia Airlines Bhd (MAS) is the latest airline to ask its 13,000 employees to take voluntary unpaid leave as the spread of coronavirus (Covid-19) takes a heavy toll on airlines' bottom line.

According to documents seen by theedgemarkets.com, the national carrier is offering all employees the option of taking three months no-pay leave or five days no-pay leave per month for at least three months, starting April. The voluntary unpaid leave programme is extended to employees employed by subsidiaries of Malaysia Aviation Group (MAG) such as MAB Kargo, MAB Engineering, Firefly and MASwings.

In an immediate response to this report, MAS confirmed that MAG has given its staff the option to voluntarily take five days of unpaid leave per month for at least three months; or between one to three months beginning April.

"This is in line with its reduced operations following a capacity management exercise due to Covid-19," it said in a statement today.

"To date, MAS has cancelled more than 2,000 flights up to April due to travel restrictions imposed by countries within our network," it added.

On Monday, MAS group CEO Captain Izham Ismail announced a 10% pay cut for its senior management as part of measures to lower operational costs. They will also forgo their allowances.

"The impact (of Covid-19) to the market is tremendous. People are not travelling. Businesses not operating as they used to be and the aviation landscape has changed tremendously. MAG is not spared from all of this," he said in a video to the airline's employees.

In the first quarter of 2020 alone, MAS has removed 7.1% of its capacity. MAS has also cut its capacity to China by 53% and that to South Korea and Japan by 23%.

"At the rate and momentum of this crisis, more flights will have to be cancelled because there is just less demand in the marketplace," said Izham.

Already, major international airlines such as Singapore Airlines, Cathay Pacific, British Airways, Lufthansa, Emirates, Virgin Atlantic and EasyJet are offering staff unpaid leave.

It was reported that Malindo Air has also ordered its staff to take two weeks of unpaid leave and a 50% salary cut in addition to suspending flights and asking vendors to delay payments.

Qantas group CEO Alan Joyce is reportedly giving up his salary for the rest of the financial year. Its board of directors and group executive management will also take a 30% pay cut.

On March 5, the International Air Transport Association warned that global airlines could suffer revenue losses of up to US$113 billion in 2020 if the virus continues to spread.

MAS is owned by Khazanah Nasional Bhd, which has been looking for a strategic partner for the national carrier since last year. While it managed to keep flying thanks to an injection of funds from Khazanah, the airline continues to struggle amid challenging operating environment, owing to intense competition, weak ringgit and overcapacity.