Analysis

Fiji Airways Not Alone In Struggle

It is very important to note that Fiji Airways is not the only aviation country in the world facing enormous financial difficulties right now and it is certainly not the first company to terminate staff. But, while they have terminated staff, they have also retained 731 staff.
27 May 2020 12:54
Fiji Airways Not Alone In Struggle
While Fiji Airways has terminated some staff members, they have also retained 731 people.

A lot was said about our national carrier Fiji Airways in Parliament on Monday, from the Government guarantee of a loan sought by the Company to the termination. It did not help when the discussions on the floor went off tangent and once again Opposition decided to bring debunked conspiracy theories to the House.

Government guarantee:

Attorney-General and Minister for Economy Aiyaz Sayed-Khaiyum moved a motion that Government guarantee a loan that Fiji Airways wants to take to keep the company viable. It is very important to note that Fiji Airways is not the only aviation country in the world facing enormous financial difficulties right now and it is certainly not the first company to terminate staff. But, while they have terminated staff, they have also retained 731 staff.

The motion was seconded by Inia Seruiratu. The motion read:

(a) That the Government guarantee the Fiji Airways borrowings consisting of a mix of domestic borrowings of up to FJ$191.1 million and offshore borrowings of up to US$117.1 million with a total limit of approximately FJ$455 million valid for a period of three years, effective from 30th May, 2020; and

(b) That the Fiji Airways be exempted from paying a guarantee fee.

What should have been a simple debate on the motion turned into a drama by Members of Parliament like Viliame Gavoka.

Suspended SODELPA Opposition MP Viliame Gavoka. Photo: Ronald Kumar

Suspended SODELPA Opposition
MP Viliame Gavoka. Photo: Ronald Kumar

To understand why Fiji Airways needs this guarantee, we need to first look at what is happening in other countries. Mr Sayed-Khaiyum updated Parliament on this:

  • The Air France– KLM have received US$12 billion grant from the French and Dutch government. Notwithstanding that, KLM will cut up to 2000 jobs and Air France will cut about 5000 jobs.
  • American Airlines is receiving US$10.55 billion from the US Government’s bail-out scheme and 39,000 staff have gone on voluntary time-off, as it assesses in numbers to lay-off.
  • Cathay Pacific is receiving US$30.4 million cash grant from the Hong Kong government and the Hong Kong government will buy 500,000 tickets from all Hong Kong-based airlines. They will still lay-off hundreds of cabin crew and other staff with 433 overseas-based crews to be axed completely.
  • Delta will receive US$5.4 billion from the US government bail-out and 27,000 staff have gone on unpaid leave.
  • For Lufthansa, the Governments of Germany, Switzerland, Austria and Belgium look at a rescue package worth US$10.8 billion. The Airline says it may need to string the workforce by 10,000 people.
  • Emirates is cutting the jobs of 30,000 staff, despite the fact that it is being promised cash bailouts and Emirates is looking at raising billions in additional loans.
  • Closer to home, Air New Zealand has received US$550 million directly from the New Zealand government. Notwithstanding that, they have cut 4000 jobs, including 1500 crew members.
  • Air Mauritius, a comparable country to ours, has been placed in voluntary administration and staff have all gone on unpaid leave, where staff cuts on permanent basis will take place.
  • South African Airways is seeking USD$5.11 billion assistance from IMF, World Bank and the New Development Bank. All staff have gone on unpaid leave.
  • Virgin Australia- Some subsidy given by the Australian government for domestic flying only, thousand workers to be made redundant, 8000 to be stood down awaiting next steps for the administrators that have been appointed.
  • The Australian aviation industry overall will receive AUD $715 million, Government rescue package, plus Australian government will pay Qantas and Virgin Australia up to Australian $165 million, to maintain key domestic flight routes only, not for international. They will stand down 20,000 workers – two-thirds of its workforce.
Attorney-General and Minister for Economy Aiyaz Sayed-Khaiyum. Photo: Ronald Kumar

Attorney-General and Minister for Economy Aiyaz Sayed-Khaiyum.
Photo: Ronald Kumar

These have been some of the biggest players in the global aviation industry and they have had to let go of tens of thousands of their staff including cabin crew despite having given hundreds of millions of dollars in loans and subsidies.

Fiji Airways is a relatively small player when compared to these big giants. There is no way possible that Fiji Airways could have retained 100 per cent of their staff.

And, if Government had not stepped in to guarantee this loan, it would have left our national carrier in dire financial situation.

“Despite, earning near zero revenue, Fiji Airways currently has to pay monthly fixed cost of FJD$38 million. This comprises of aircraft loans and leases of Fijian $20.2 million, employee costs, fixed payments for aircraft maintenance and other costs totalling $6 million. As we all know now that steps have also been taken in respect of arresting some of the costs viz-a-viz the staff cuts that have taken place. Mr Speaker, Sir, in addition to the fixed costs, ongoing flights suspensions and cancellations are contributing towards increased customer refunds even if tickets have been resold as non-refundable, Fiji Airways is obliged to refund customers as the service is not being delivered at all.”

The airline currently operates freight flights every week to Sydney, Auckland, Los Angeles and Hong Kong, but on a cost of capital recovery basis. In other words, it makes zero profit but has no cash loss.

“As we know, Mr. Speaker, Sir, Fiji Airways is not a solely freight company, it is a passenger carrier and the way it makes money is that, the passengers are on top and freight at the bottom. Now, there is nobody on top, only freight at the bottom but in order to be able to make these freight flights, there is slightly an increase in freight charges but they are being subsidised in the freight that comes back.”

In terms of the exports going out of Fiji, 75 per cent of that is fresh agriculture produce going to Sydney, New Zealand, Los Angeles, garments are 14 per cent, kava is six per cent, seafood is three per cent and other commodities.

These freight flights are practically important for us. It keeps the supply chain open. So, when we have the freight going from Fiji, they charge the lower price for exporters and coming back to those that we are importing at a slightly higher price, simply pays for the fuel, pays for the crew and that is it.

Salaries:

Despite having next to no revenue for few months, and with staff staying home, Fiji Airways continued to pay their staff 70 per cent of their salaries.

Fiji Airways has kept its staff employed albeit with the 35 per cent reduction in the salaries of the executives and 30 per cent reduction for other staff.

In other words, all the staff that have not been working for the past two months have been paid 70 per cent with salaries. But, of course, this cannot continue.

Objection:

Suspended SODELPA MP Viliame Gavoka used this motion as the opportunity to launch a monologue on Air Pacific and what was. Anyone listening to Mr Gavoka would assume that he speaks with authority on the issue of Fiji Airways having being part of our tourism industry for a while.

But, a close look at what he is saying reveals that he is speaking rubbish. So many times, we have heard the shenanigans of Qantas when they were the majority shareholders of Fiji Airways, but Mr Gavoka thinks Qantas should have been allowed to play a bigger role in our national carrier.

This is the same company we were in direct competition with and we expected them to have our best interest at heart.

Mr Gavoka’s thinking is so limited that he does not think a country like Fiji should have an impressive fleet like what we have today.

The global downturn in economy and the subsequent crippling of the aviation industry due to the coronavirus outbreak caught everyone off guard. Having a smaller fleet would not mean that we would magically be allowed to fly when almost all countries have closed their borders off.

Edited by Naisa Koroi

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