Singapore Airlines Ltd, Asia's largest airline by market value, said it will cut jobs to pare costs as it forecasts a first-quarter loss after the outbreak of SARS left its planes half empty.
Singapore Airlines plans to cut as many as 2,500 jobs, or 8.3 percent of its workforce, the Straits Times newspaper reported, citing unidentified people. The number of ground employees will be reduced by as much as 10 percent and cabin crew and pilots by as much as 5 percent, the report said. The company has 6,600 cabin crew and 1,800 pilots.
"If it's really an 8.3 percent cut in workforce, then it's a big cut," said Pieter van Putten, chief executive officer of Morley Fund Management Singapore Ltd, which oversees the equivalent of US$3 billion in Asia.
"It will help Singapore Airlines save costs considerably and will help it to break even," he said.
Faced with falling demand and cost-cutting measures by rivals such as Qantas Airways Ltd, Singapore Air wants to lower labor costs by S$200 million (US$116 million) annually. It reduced 31.5 percent of its capacity, or 358 weekly services, as the SARS outbreak put people off traveling.
"We have made it clear to our staff that some degree of retrenchment cannot be avoided," said Singapore Airlines spokesman Rick Clements.
He declined to comment on the numbers.
Singapore Airlines shares rose as much as 2.8 percent to S$11.20 and closed morning trading at S$11. Before today, the shares had risen 6.9 percent this year, compared with a 9.3 percent increase on the benchmark Straits Times Index.
Employees who have worked for the airline for at least 25 years will be offered an early retirement package, Clements said.
Job cuts are "unavoidable from their perspective," said Steven Lim, who manages the equivalent of US$270 million at Daiwa SB Investments in Singapore, including Singapore Air.
"Taking the view that recovery in air traffic will not be quick nor full enough, this is a way to compete," he said.
The airline has already asked its cabin crew to take seven days unpaid leave every two months, and is in talks with more staff to take leave and cut wages by as much as 28 percent. It's also seeking court arbitration to persuade its pilot union to accept a wage cut and go on unpaid leave.
Singapore Airlines, which has been profitable since going public in 1985, had an operating loss of S$204.2 million in April, its largest single monthly loss. The airline may lose as much as S$1 billion this year after it carried 50 percent fewer travelers because of SARS, Prime Minister Goh Chok Tong said on May 25.
The airline filled 53.1 percent of seats with paying passengers last month, from 72 percent a year earlier. It filled 63.6 percent of its combined passenger and cargo capacity last month, compared with 69.8 percent a year earlier.
Singapore Air used more of its overall capacity than in April, when it filled the smallest amount of its available passenger and cargo space since at least 1990.
"Business volume is slow, and although there are signs of a pick-up, Singapore Air has room to cut some fat," said Seah Hiang Hong, head of research at Kim Eng Ong Asia Securities Ltd.
He has a "buy" rating for the stock.
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