SINGAPORE Airlines (SIA) staff are facing pay cuts, as the carrier is almost certain to lose money in the April-June quarter, say analysts.
The company has suffered a quarterly loss only once since it went public in 1985 - when Sars hit the region in 2003.
SIA will announce in the coming weeks how it fared in the three months from April to June, but four of the five analysts polled by The Straits Times said a loss was inevitable.
JPMorgan's Corrine Png said: 'I expect that the numbers are going to be bad.'
The airline has already cut the pay of its top management by 10 per cent to 20 per cent.
If SIA reports an operating loss of at least $50 million for the quarter, all its staff will see their pay packets shrink by 2.5 per cent or more.
Under agreements signed with its three unions, SIA will cut 25 per cent of the monthly variable component (MVC) built into staff salaries if the airline makes an operating loss of $50 million or more in any given quarter.
All of the MVC, which currently makes up 10 per cent of an employee's total pay, will go if losses exceed $200 million.
Captain P. James, president of the Air Line Pilots Association-Singapore, said: 'This is what we agreed to, so while we hope for the best, it is a possibility we are prepared for.'
Mr Alan Tan, president of the SIA Staff Union, which represents cabin crew and other rank-and-file staff, said: 'The cuts, if they come, are something that we will just have to accept. At the end of the day, the priority is to save all jobs.'
Because of poor business conditions, SIA - which is struggling with excess manpower and over-capacity - has already moved to cut costs.
Employees have been put on a shorter work month scheme, and pilots have agreed to give up 65 per cent of one day's pay a month.
Even though it cut capacity by 14.4 per cent last month, the airline said on Wednesday that it had managed to fill only 75.7 per cent of total seats, compared with almost 80 per cent in June last year. The reason was that passenger traffic fell by a sharper 19.2 per cent.
The traffic slump is worrying, but SIA is being hurt even more by the slowdown in the first-class and business-class segment, which accounts for almost half of its revenues, and by the falling yields, say analysts.
SIA has been cutting fares to fill its planes.
For example, it currently offers a $498 all-inclusive deal to Perth, and $698 to other destinations in Australia, for selected credit card holders.
Normal return fares are more than $1,000.
Aviation expert Shukor Yusof at Standard & Poor's Equity Research said: 'The situation is quite nasty. Demand continues to be weak, and yields are being pushed down because of the very competitive measures being introduced by all airlines and the low-cost carriers as well.'
To cope with the crisis, SIA is also upgrading its products in the hope of stimulating demand in some markets.
It is now retrofitting seven Boeing 777-300 aircraft, which will offer bigger seats and in-flight entertainment screens in the first-class and business-class sections. The move will reduce the number of seats per aircraft from 332 to 284.
SIA will fly the retrofitted planes to Sydney and Shanghai as well as to the Middle East.
The airline's plight mirrors that of other premium carriers such as Cathay Pacific, British Airways and Qantas.
In its latest monthly report, released yesterday, the International Air Transport Association said that worldwide, international premium traffic had fallen by 23.6 per cent in May, compared with the same month last year.
Premium travel numbers had been in decline for 12 consecutive months already, said the association, which represents about 230 carriers globally.
SIA shares closed 14 cents higher at $13.44 yesterday.
