June 18, 2024

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World’s Largest Long-Haul Airline to Halt All Flights

(Bloomberg) —

Emirates, the world’s largest long-haul airline, will suspend all of its passenger operations this week, in the latest concession to the coronavirus pandemic that has devastated global travel.

Flights to all destinations will cease from March 25, Dubai-based Emirates said Sunday in an email. Cargo service will remain in operations, the company said.

“We cannot viably operate passenger services until countries re-open their borders, and travel confidence returns,” Chairman and Chief Executive Officer Ahmed bin Saeed Al Maktoum said in a memo to employees seen by Bloomberg. “Some of our competitors, or even our supply chain partners, may not survive this crisis.”

The airline’s announcement came a few hours before the United Arab Emirates’ General Civil Aviation Authority said it will halt all inbound and outbound passenger flights for two weeks. The U.A.E. is also home to Flydubai, Abu Dhabi’s Etihad Airways and Air Arabia, the Middle East’s largest discount carrier.

With its fleet of all wide-body aircraft, the Emirates has turned Dubai into a hub for global travel, typically operating more than 500 flights a day. That mission, which has fed the city’s growth since Emirates was founded in the mid-1980s, is now under assault by the coronavirus pandemic.

Shutting Down

Countries are closing off access to protect their populace, dealing a body blow to the global airline industry. Carriers that were in relatively good health at the start of the year have had to ground fleets, lay off staff and request government aid for survival.

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Major U.S. carriers like Delta Air Lines Inc. and American Airlines Group Inc. are waiting on lawmakers to clear a bailout package, while in London, where Heathrow airport, the busiest hub in Europe, the government is considering moves to support the industry that include loans and potentially equity infusions.

Similar scenarios are playing out in Germany, France and Scandinavia, while China has already nationalized the parent of Hainan Airlines Holding Co., as is Italy with bankrupt flag-carrier Alitalia.

Long-Distance Hub

The Emirates business model is built around a fleet of Airbus SE and Boeing Co. long-distance aircraft carrying passengers between all corners of the globe, and while the spread of the virus is easing in parts of Asia, it’s accelerating in Europe and North America.

The airline was just emerging from another downturn, completing a strategy rethink late last year after persistent low oil prices weighed on regional economic growth.

Emirates dropped the Airbus A380 from its long-term plans, ordered smaller wide-body aircraft and reviewed its route network, while increasing cooperation with regional discount carrier Flydubai — also state-owned.

Now a recovery in oil prices has been reversed by the outbreak, with a price war between Saudi Arabia and Russia exacerbating the economic hit on the Gulf.

“Until January 2020, the Emirates Group was doing well against our current financial year targets,” Sheikh Ahmed said. “But COVID-19 has brought all that to a sudden and painful halt over the past six weeks.”

The airline’s base at Dubai International Airport, the world’s busiest in terms of international passengers, has followed other jurisdictions in banning tourists and residence visa holders from entering the country.

Emirates plans to ground 230 planes, or 85% of its fleet, Chief Operating Officer Adel Al Redha told Alarabiya News Channel on Sunday.

The Gulf carrier was considering idling the bulk of its 115 Airbus A380 super-jumbo aircraft, and plans to delay the handovers of the final handful of planes that are due, Bloomberg News has reported. The airline also operates 155 Boeing 777 jets.

Salary Cuts

The outlook for travel demand remains weak across markets in the short to medium term, Emirates said, adding that it will take the following measures:

A temporary reduction of basic salary for the majority of Emirates Group employees for three months, ranging from 25% to 50%.Employees will continue to be paid their other allowances during this time. Junior level employees will be exempt from basic salary reduction.Emirates President Tim Clark and Dnata President Gary Chapman will take a 100% basic salary cut for three months.

Cabin service attendants’ basic salaries or fixed allowances will not be reduced, according to the memo.

“If any employee had volunteered previously for unpaid leave, they can now opt to cancel that leave in lieu of the above,” Sheikh Ahmed said.

Flydubai, which has an extensive partnership with Emirates, canceled more than 85% of its flights.

Read more: Halt Travel to Fight Coronavirus? The Pros and Cons: QuickTake

(Updates with U.A.E. decision to halt all flights in fourth paragraph.)

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