As airlines all over the globe suffer unprecedented pressure to ensure future operations, entire fleets are being grounded – even on airport runways due to the lack of space. It was therefore evident that the largest and most iconic airline in the Middle East would have to take the decision to suspend most passenger flights from March 25. However, cargo flights are exempt from the decision as they are necessary to transport essential goods during this delicate period.
In a statement, the Emirates Group said that “it is a painful but pragmatic move in order to preserve business viability and secure jobs worldwide”.
Nonetheless, the carrier will be still fly to some key destinations in North America, the UK, Australia and Japan following governmental requests to assist with repatriation labors, while running its Cargo division which, last year, represented a big portion of the total 2.5 million tons transported through Dubai’s International Airport.
As a global transit airline, the board is aware of the unmeasurable repercussions this decision has on Dubai’s economy (highly reliant on tourism), but as the CEO of Emirates Group, Sheikh Ahmed bin Saeed Al Maktoum mentioned: “the world has literally gone on quarantine,” suggesting the demand for air-travel is inexistent which ultimately led them to such a drastic decision.
He also notes that they “are closely following the situation until countries re-open their borders, and travel confidence returns” so that they can gradually restore operations to the 160 destinations that they served previous to the Coronavirus crisis, while the impact on their customers is minimized.
Similarly, a strong commitment from the company to keep jobs worldwide has been expressed as the intention to go through different cost-saving measures have been put in place.
Those include, among others, limiting recruitment, reducing the operations of Dnata (ground service division with presence in different countries) and a basic salary reduction for the majority of the group’s employees. These reductions would cut salaries up to 50% for the following 3 months, while those of junior level employees are left intact.
This way, the airline avoids massive staff furloughs during “a prolonged period of reduced flight schedules” for which the group states being “financially strong” and therefore, able to survive for some few months.
Let’s bear in mind that airlines depend on constant cash-flows (liquidity) to ensure payments even in the short-term.
Moreover, all operations will be carried out by 777 aircraft, whose capacity is much less compared to the A380 and therefore cheaper to operate. It is also the aircraft type used for Cargo in the Freighter variant.
In the Middle East, 16,000 passenger flights have been cancelled since late January, accounting for more than $7 billion in losses for the airlines in the region, according to the IATA.
Emirates transported more than 58M passengers last year and had a profit of $237M (69% reduction compared to the previous fiscal year).