Thai AirAsia (TAA) has announced mass layoffs and extended furloughs after struggling with the impact of the pandemic, despite the country's reopening on Nov 1.
Tassapon Bijleveld, executive chairman of Asia Aviation (AAV), the largest shareholder of TAA, made the announcement to TAA's employees on Wednesday, indicating that the real situation in terms of the aviation outlook remains unstable, prompting the company to reduce its fleet size next year and consequently reduce its workforce to maintain financial stability over the long run.
"Even though we've negotiated with suppliers and banks to help offload aircraft leasing costs, and we may get additional liquidity after restructuring this month, our balance sheet cannot be strong enough if those expenses still run. We have to permanently cut the fleet for at least two years or until international and domestic flights fully recover," Mr Tassapon said at the internal meeting.
TAA announced on Monday that its fleet size would be cut from 60 to 54 as revenue from international routes is still limited due to different reopening policies from country to country.
Mr Tassapon added that the airline had already bottomed out in the third quarter, and it estimated that the domestic market should fully recover by mid-2022, while international flights might gradually return to 20-30% of 2019 levels. The best-case scenario for international routes is that TAA resumes 50% of pre-pandemic scheduled flights by the end of next year.
"It's hurtful to take such a decision, but it's based on reality which we cannot answer as to when the situation will improve. We have to wait until revenue from international routes comes back and that will depend on the entry regulations of Thailand and overseas destinations," said Mr Tassapon.
According to the announcement, TAA is deciding on the number of layoffs this week and will announce the list of employees to be laid off by next week. The company is also launching an early retirement programme for those who are willing to leave.
TAA and six other airlines in the country submitted a proposal to the government in April 2020, asking for soft loans to help sustain jobs for over 20,000 employees following the impact of the first nationwide lockdown in the second quarter of that year.
They had to wait until the third quarter of this year to get a response from the Export-Import Bank of Thailand (Exim Bank), which has the duty to look after those airlines. However, the financial support each airline receives is different, while a few airlines, including TAA, still haven't received assistance.
Mr Tassapon said that due to the volatile situation, TAA has to maintain furloughs and pay cuts but will assess the situation every two months and gradually remove the cuts when the financial situation improves.
In its third-quarter financial results, TAA reported total revenue of 457 million baht and a net loss of 2.09 billion baht. The restructuring plan set to be proposed to shareholders at a meeting on Nov 26 is expected to generate additional funds of 14 billion baht from new investors.